Problem:
An insurance company has the following profitability analysis of its services:
Life Insurance Auto Insurance Home Insurance
Revenues $5,000,000 $10,000,000 $3,000,000
Commissions (1,000,000) (2,000,000) (600,000)
Payments (3,000,000) (7,300,000) (2,000,000)
Fixed Costs (500,000) (500,000) (500,000)
Profit $ 500,000 $ 200,000 ($ 100,000)
The fixed costs are distributed equally among the services and are not avoidable if one of the services is dropped. What is the profitability of the remaining services if all services with losses are dropped?