Assume that Sara is partly correct in her assessment of the report. Upon further investigation, it is determined that 10 % of the order processing costs and 20 % of the delivery costs would not be avoidable if CRS were to drop Donnelly's. Would CRS benefit from dropping Donnelly's? Show your calculations.

CRS would not benefit from dropping Donnelly’s Pizza because it would lose $43,680 in revenues and save $43,344 in costs resulting in a $336 decrease in operating income.

Explanation:

Difference: Incremental(Loss in Revenues)and Savings in Costs from dropping Donnelly’s Pizza:

Revenues $(43,680)

Cost of goods sold 26,180

Order processing ($14,000 – 10% × $14,000)= 12,600

Delivery ($3,500 – 20% × $3,500)= 2,800

Rush orders 924

Sales calls 840

Total costs 43,444

Effect on operating income (loss)

$(336)

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