Problem 1-43 (Algo) Cost Data for Managerial Purposes (LO 1-3) KC Services provides landscaping services...
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Problem 1-43 (Algo) Cost Data for Managerial Purposes (LO 1-3) KC Services provides landscaping services 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 $60,400 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 12 percent of the equipment leases, labor, and other costs. She also expects to save 27 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 $ 402,000 After Dropping Service Sales revenue Costs Equipment leases Labor Utilities Rent 275,000 37,800 21,000 25,500 17,500 65,000 441,800 (39,800) Other costs Manager's Salary Total costs Operating profit (loss) $ S 0 $ b. Should Kate discontinue the lawn service? Yes
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