Table $7\mathrm{.}12$ Differential Analysis for Colony Landscape Maintenance, Alternative $1$

Alternative $1($keep all customers$)$

Brumfield Hodges Orth Total

Sales revenue $ $200,000$ $ $500,000$ $ $300,000$ $ $1,000,000$

Variable costs $170,000380,000200,000750,000$

Contribution margin $ $30,000$ $ $120,000$ $ $100,000$ $ $250,000$

Direct fixed costs $25,00040,00030,00095,000$

Allocated fixed costs $20,00050,00030,000100,000$

Profit $($loss$)$ $ $(15,000)$ $ $30,000$ $ $40,000$ $ $55,000$

Table $7\mathrm{.}13$ Differential Analysis for Colony Landscape Maintenance, Alternative $2$

Alternative $2($drop Brumfield account$)$

Hodges Orth Total

Sales revenue $ $500,000$ $ $300,000$ $ $800,000$

Variable costs $380,000200,000580,000$

Contribution margin $ $120,000$ $ $100,000$ $ $220,000$

Direct fixed costs $40,00030,00070,000$

Allocated fixed costs $62,500$a $37,500$b $100,000$

Profit $ $17,500$ $ $32,500$ $ $50,000$

a $$62,500=($$$500,000-$: $$800,000)\backslash$times $$100,000.$

b $$37,500=($$$300,000-$: $$800,000)\backslash$times $$100,000.$

Table $7\mathrm{.}14$ Differential Analysis for Colony Landscape Maintenance, Comparison of Alternatives

Differential Analysis

Alternative $1$ Total $($keep all customers$)$ Alternative $2$ Total $($drop Brumfield account$)$

Differential Amount

Alternative $1$ Is

Sales revenue $ $1,000,000$ $ $800,000$ $ $200,000$ Higher

Variable costs $750,000580,000170,000$ Higher

Contribution margin $ $250,000$ $ $220,000$ $ $30,000$ Higher

Direct fixed costs $95,00070,00025,000$ Higher

Allocated fixed costs $100,000100,0000$

Profit $ $55,000$ $ $50,000$ $ $5,000$ Higher

Figure $7\mathrm{.}2$ provides a chart summarizing how total profit will decrease if the Brumfield account is dropped. This information comes from the bottom of Table $7\mathrm{.}12$ and Table $7\mathrm{.}13.$

Table $7\mathrm{.}15$ Summary of Differential Analysis for Colony Landscape Maintenance

Result of Dropping Brumfield Account

Sales revenue lost $ $(200,000)$

Variable costs eliminated $170,000$

Contribution margin eliminated $ $(30,000)$

Direct fixed costs eliminated $25,000$

Loss from dropping customer $ $(5,000)$

Note: Amount shown in parentheses indicate a negative impact on profit, and amounts without parentheses indicate a positive impact on profit.