Continue or Discontinue (LO1, 2)

Lakeland Eye Clinic primarily performs three medical procedures: cataract removal, corneal implants, and laser keratotomy. At the end of the first quarter of this year, Dr. Pathaja, president of Lakeland, expressed grave concern about the cataract sector because it had reported a loss of $35,000. He rationalized that “since the cataract market is losing $35,000, and the overall practice is making

$140,000, if we eliminate the cataract market, our total profits will increase to $175,000.”

Required

a. Is the president’s analysis correct?

b. Will total profits increase if the cataract section is dropped?

c. Is it possible total profits will decline?

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