Garches Group LLP currently provides consulting services to three clients (X, Y, and Z). It is in the process of evaluating the profitability of each client with a view to possibly dropping one or more of the clients. A detailed analysis of each clients account for the most recent month follows:

Revenue Variable costs Client-specific fixed costs Share in company-wide fixed costs Operating profit (loss)	Client X	Client Y	Client Z	Total
	82,000	96,000	47,000	225,000
	45,100	62,400	37,600	145,100
	15,909	26,528	12,363	54,800
	8,091	10,472	5,137	23,700
	12,900	(3,400)	(8,100)	1,400

Variable costs for each client form a constant percentage of the clients fee. Fixed costs consist of both company-wide and client-specific fixed costs. Company-wide fixed costs have been allocated across clients in proportion to the sales fee collected from each client.

A) Based on this information Garches is planning to drop clients Y and Z. Predict the new level of operating profit if the company drops clients Y and Z?

B) Which clients would you recommend that the company drop, if any? Provide a numerical financial analysis to explain your answer, and if you disagree with the companys own proposal explain why.

C) SpecialistmuchoftheworkforClient,andwillleaveClaytonCompanytoworkprivatelyforClientifClaytonCo.dropsClient Z. This in turn means that Garches will be unable to perform similar specialist engineering work for Client X, and will lose $6,500 in fees from client X. Francois monthly salary of $7,500 is classified as a Client Z specific fixed cost. Advise Garches on whether the company should keep or drop Client Z, and provide your supporting financial analysis.