KC Services provides landscaping services in Edison. Kate Chen, the owner, is concerned about the recent losses the company has incurred and is considering dropping its lawn services, which she feels are marginal to the companys business. She estimates that doing so will result in lost revenues of $55,000 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 lawn business, Kate estimates that the company will save 15 percent of the equipment leases, labor, and other costs. She also expects to save 16 percent on rent and utilities.

Required :

a. Prepare a report of the differential costs and revenues if the lawn service is discontinued. (Enter loss amount with minus sign.)

KC SERVICES
Annual Income Statement
	Before Dropping Service	After Dropping Service
Sales revenue	$320,000
Costs
Equipment leases	170,000
Labor	65,000
Utilities	14,900
Rent	31,000
Other costs	22,000
Manager's Salary	65,000
Total costs	$367,900	$0
Operating profit (loss)	$(47,900)