Gandhi Ltd renders a promotional service to small retailing businesses. There are three levels of service: the ‘basic’, the ‘standard’ and the ‘comprehensive’. On the basis of past experience, the business plans next year to work at absolute full capacity as follows:

The business’s fixed cost totals £660,000 a year. Each service takes about the same length of time, irrespective of the level.
One of the accounts staff has just produced a report that seems to show that the standard service is unprofitable. The relevant extract from the report is as follows:

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Service Basic Standard Comprehensive Number of units of the service Selling price Variable cost per unit 11,000 6,000 16,000 50 80 120 25 65 90