The Montana Consulting is evaluating the profitability of their two clients, X and Y. Total fixed costs are allocated evenly between customer X and Y, and will remain the same whether they add or drop clients. Should The Montana Consulting drop client Y? The profit/loss for each customer is shown below. Should client Y be dropped?

XYRevenue320,000154,500Variable costs173,000120,500Contribution margin147,00034,000Allocated fixed costs65,00065,000Customer profit (loss)82,000(31,000)

No, profit will decrease if Client Y is dropped.

Yes, because their revenues are much lower than Client X.

Yes, profit will increase if Client Y is dropped.

Yes, because any customer showing a loss should be dropped.

The Montana Consulting is evaluating the profitability of their two clients, X and Y. Total fixed costs are allocated evenly between customer X and Y, and will remain the same whether they add or drop clients. Should The Montana Consulting drop client Y? The profit/loss for each customer is shown below. Should client Y be dropped? X Y Revenue 320,000 154,500 Variable costs 173,000 120,500 Contribution margin 147,000 34,000 Allocated fixed costs 65,000 65,000 Customer profit (loss) 82,000 (31,000) O No, profit will decrease if Client Y is dropped. O Yes, because their revenues are much lower than Client X. O Yes, profit will increase if Client Y is dropped. O Yes, because any customer showing a loss should be dropped