Problem
Michelle has a dance studio and teaches ballroom dance, jazz dance, and hip hop. However, the jazz dance program is not doing very well and she is considering discontinuing the jazz program. If she does discontinue jazz dance, she will be able to eliminate 40% of the fixed costs of jazz, but the other 60% will continue.
Ballroom Jazz Hip Hop Total .
Revenues $25,000 $15,000 $30,000 $70,000
Variable Costs $11,000 $ 8,000 $14,000 $33,000
Contribution Margin $14,000 $ 7,000 $16,000 $37,000
Fixed Costs $ 7,000 $14,000 $10,000 $31,000
Operating Income $ 7,000 -$7,000 $ 6,000 $ 6,000
What will be the change to income if Michelle discontinues her jazz class?
Should she discontinue Jazz dance classes?