Lakeland Financial Services provides outsourcing services for three areas: payroll, general ledger (GL), and tax compliance. The company is currently contemplating the elimination of the GL area because it is showing a pre-tax loss. An annual income statement follows. Lakeland Financial Services Income Statement by Service Line For the Year Ended July 31, 2013 (in thousands) Payroll GL Tax Total Sales $ 4,378 $ 3,218 $ 3,581 $ 11,177 Cost of sales (2,781) (1,981) (2,141) (6,903) Gross margin $ 1,597 $ 1,237 $ 1,440 $ 4,274 Avoidable fixed and variable costs $ 1,247 $ 1,504 $ 1,024 $ 3,775 Allocated fixed costs 194 149 214 557 Total fixed costs $ 1,441 $ 1,653 $ 1,238 $ 4,332 Operating profit $ 156 $ (416) $ 202 $ (58) a. Should corporate management drop the GL area? Gross margin GL services $ Avoidable fixed and variable operating costs Segment margin $ b. If the GL area were dropped, how would the companys pre-tax profit be affected?