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3. In addition to selling custom-designed jewelry, Darrah's Jewelry Store also offers repair and appraisal services. Cost of sales is the cost of!abor and therefore 100% variable Facility- sustaining costs of $45,000 are allocated equally. After reading the following profit report, decide whether Darrah's should drop the appraisal service. Revenues Cost of sales (service) Gross profit (margin) Facility-sustaining costs Profit Jewelry Sales $90,000 45,000 45,000 15,000 $30,000 Repair Services $45,000 25,000 20,000 15,000 $5,000 Appraisals $5,000 000 4,000 15,000 S(11,000) 4. 35 Flavors operates an ice cream and frozen yogurt business. The owner is concerned because the yogurt business seems to be losing money. The owner has provided the following information concerning the yogurt business. Sales Less: cost of yogurt mix Gross margin Less operating expenses: $26,000 $18,000 Wages of counter personnel Utilities Supplies (cups, spoons, etc.) Depreciation of yogurt freezers Rent on building Manager's salary 7,000 2,500 4,500 1,500 2,000 Profit (loss) on yogurt business S(1,500) A cost analysis reveals that wages of yogurt counter personnel will be eliminated if the yogurt line is discontinued. The utilities cost is allocated base on square footage. Should the owner discontinue the yogurt product line? 105

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