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 $ 4,398 $ 3,179 $ 3,596 $ 11,173

Cost of sales (2,819) (2,003) (2,174) (6,996)

Gross margin $ 1,579 $ 1,176 $ 1,422 $ 4,177

Avoidable fixed and variable costs $ 1,252 $ 1,436 $ 1,026 $ 3,714

Allocated fixed costs 196 144 214 554

Total fixed costs $ 1,448 $ 1,580 $ 1,240 $ 4,268

Operating profit $ 131 $ (404) $ 182 $ (91)

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?

The pretax profit of the company would $