KC Services provides landscaping services in Edison. Kate Chen, the owner, is concerned about the re

KC Services provides landscaping services in Edison. Kate Chen, the owner, is concerned about the recent losses the company has incurred and is considering dropping its lawn services, which she feels are marginal to the company’s business. She estimates that doing so will result in lost revenues of $57,500 per year (including the lost tree business from customers who use the company for both services). The present manager will continue to supervise the tree services with no reduction in salary. Without the lawn business, Kate estimates that the company will save 10 percent of the equipment leases, labor, and other costs. She also expects to save 12 percent on rent and utilities.

Required :

a. Prepare a report of the differential costs and revenues if the lawn service is discontinued. (Enter loss amount with minus sign.) KC SERVICES Annual Income Statement Before Dropping Service After Dropping Service Sales revenue $360,000 Costs Equipment leases 210,000 Labor 50,000 Utilities 17,800 Rent 34,500 Other costs 20,000 Manager's Salary 70,000 Total costs $402,300 Operating profit (loss) $(42,300)

b. Should Kate discontinue the lawn service?

Yes

No