ServicePro provides two kinds of services. During the most recent accounting period, the two service lines produced the following operating results: $\begin{array}{lrl}
&\text { Service } 1&\text { Service } 2\
\text { Service revenue } & \$ 120,000 & \$ 48,000 \
\text { Unit-level materials } & \$(28,000) & \$(10,000) \
\text { Unit-level labor } & \$(38,000) & \$(22,000) \
\text { Product-level selling \& administrative costs } & \$(18,000) & \$(11,500)\
\text { Company wide facility-level costs } & \underline{
\$(6,000) }&\underline{
\$(6,000)}\
\text { Net income (loss) } & \underline{
\$ 30,000}&\underline{
\$(1,500)}
\end{array}$ If the company stops providing Service 2:

Question

Quizplus · Accepted Answer

If Service 2 is discontinued, the company will save $10,000 in unit-level materials, $22,000 in unit-level labor, and $11,500 in product-level selling and administrative costs. However, the company will also lose $48,000 in service revenue. The net effect of discontinuing Service 2 will be an increase in income of $4,500 per year.

ServicePro Provides Two Kinds of Services If the Company Stops Providing Service 2: A) the Company's

ServicePro Provides Two Kinds of Services If the Company Stops Providing Service 2:
A) the Company's