Kendall & Floyd provides landscaping services in Eastvale. Sara Kendall, the owner, is concerned about the recent losses the company has incurred and is considering dropping Its yard cleanup services, which she feels are marginal to the company's business. She estimates that doing so will result in lost revenues of $67,800 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 yard cleanup business, Sara estimates that the company will save 14 percent of the equipment leases, labor, and other costs. She also expects to save 29 percent on rent and utilities. The Income statement before dropping the yard cleanup service follows. Required: a. Prepare a report of the differential costs and revenues if the yard cleanup service is discontinued. b. Should Sara discontinue the yard cleanup service? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a report of the differential costs and revenues if the yard cleanup service is discontinued. Note: Enter loss amount with minus sign. Sales revenue Costs Equipment leases Labor Utilities Rent Other costs Manager's salary Kendall & Floyd Annual Income Statement Before Dropping Service $ 395,000 Total costs iting profit (ler) $ 290,000 30,000 15,500 21,500 16,800 60,000 433,800 (28 900) After Dropping Service
Kendall & Floyd provides landscaping services in Eastvale. Sara Kendall, the owner, is concerned about the recent losses the company has incurred and is considering dropping Its yard cleanup services, which she feels are marginal to the company's business. She estimates that doing so will result in lost revenues of $67,800 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 yard cleanup business, Sara estimates that the company will save 14 percent of the equipment leases, labor, and other costs. She also expects to save 29 percent on rent and utilities. The Income statement before dropping the yard cleanup service follows. Required: a. Prepare a report of the differential costs and revenues if the yard cleanup service is discontinued. b. Should Sara discontinue the yard cleanup service? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a report of the differential costs and revenues if the yard cleanup service is discontinued. Note: Enter loss amount with minus sign. Sales revenue Costs Equipment leases Labor Utilities Rent Other costs Manager's salary Kendall & Floyd Annual Income Statement Before Dropping Service $ 395,000 Total costs iting profit (ler) $ 290,000 30,000 15,500 21,500 16,800 60,000 433,800 (28 900) After Dropping Service
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 44P
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Transcribed Image Text:Kendall & Floyd provides landscaping services in Eastvale. Sara Kendall, the owner, is concerned about the recent losses the company
has incurred and is considering dropping its yard cleanup services, which she feels are marginal to the company's business. She
estimates that doing so will result in lost revenues of $67,800 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
yard cleanup business, Sara estimates that the company will save 14 percent of the equipment leases, labor, and other costs. She also
expects to save 29 percent on rent and utilities. The Income statement before dropping the yard cleanup service follows.
Required:
a. Prepare a report of the differential costs and revenues if the yard cleanup service is discontinued.
b. Should Sara discontinue the yard cleanup service?
Complete this question by entering your answers in the tabs below.
Required A Required B
Prepare a report of the differential costs and revenues if the yard cleanup service is discontinued.
Note: Enter loss amount with minus sign.
Sales revenue
Costs
Kendall & Floyd
Annual Income Statement
Before Dropping
Service
Equipment leases
Labor
Utilities
Rent
Other costs
Manager's salary
Total costs
Operating profit (loss)
$
$
$
395,000
290,000
30,000
15,500
21,500
16,800
60,000
433,800
(38,800)
After Dropping
Service
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