ServicePro provides two kinds of services. During the most recent accounting period, the two service lines produced the following operating results: If the company stops providing Service 2:

Question

ServicePro provides two kinds of services. During the most recent accounting period, the two service lines produced the following operating results:  If the company stops providing Service 2:

Quizplus · Accepted Answer

The total operating income of Service 2 is $8,500, so if the company stops providing Service 2, the company's income will decrease by $8,500. However, the total direct costs of providing Service 2 is $7,000, so the company will save $7,000 in direct costs. Therefore, the net effect on the company's income will be a decrease of $1,500 per year.

ServicePro Provides Two Kinds of Services