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This one is stalling me. If you are able to help me with the answer, can you please explain how to figure it?
Norvell Lawn Care offers three lawn care services to its clients. The revenues and costs associated with each service follow:
Full Service
Complete Service
Minimum Service
Revenues
$ 60,000
$ 72,000
$48,000
Cost of Sales
42,000
43,200
25,000
Product Margin
18,000
28,800
23,000
Facility-sustaining costs
20,000
Profit
(2,000)
8,800
3,000
Norvell wants to discontinue Full Service. The facility-sustaining costs are related to depreciation on the equipment and insurance and are allocated equally across all product lines. Cost of sales includes wages, gasoline, and lawn chemicals consumed. Should Norvell drop Full Service? Why?
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