Rocky Mountain Maintenance (RMM) is an on-call mechanic and tow company that works in the area surrounding Denver, CO. The majority of RMM's customers have small vehicles that have difficulty with the steep grade of the mountain passes. RMM also currently offers their services to large commercial vehicles. However, the commercial vehicle services have recently reflected net losses. The following information relates to the costs involved servicing commercial vehicles:
Revenue: $250/service
Direct Labor: 5 hours, @ $40/hour
Supplies (gasoline, other vehicle fluids): $55/service
Office scheduling expenses (treated as allocation of fixed overhead): $60/service
Average number of commercial services performed per month: 250
Management is considering discontinuing the commercial vehicle service segment of their business.
By how much would Operating Income per month increase or decrease if this segment were dropped?

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The Answer of Rocky Mountain Maintenance (RMM) is an on-call mechanic and tow company that works in the area surrounding Denver, CO. The majority of RMM's customers have small vehicles that have difficulty with the steep grade of the mountain passes. RMM also currently offers their services to large commercial vehicles. However, the commercial vehicle services have recently reflected net losses. The following information relates to the costs involved servicing commercial vehicles:
Revenue: $250/service
Direct Labor: 5 hours, @ $40/hour
Supplies (gasoline, other vehicle fluids): $55/service
Office scheduling expenses (treated as allocation of fixed overhead): $60/service
Average number of commercial services performed per month: 250
Management is considering discontinuing the commercial vehicle service segment of their business.
By how much would Operating Income per month increase or decrease if this segment were dropped?

Rocky Mountain Maintenance (RMM) Is an On-Call Mechanic and Tow