Question
Chris's Coffee evaluates the profitability of three segments: coffee, pastries, and sandwiches. The financials are: Segment Revenue Direct Costs Coffee $400,000 $240,000 Pastries $200,000 $120,000
Chris's Coffee evaluates the profitability of three segments: coffee, pastries, and sandwiches. The financials are:
Segment | Revenue | Direct Costs |
Coffee | $400,000 | $240,000 |
Pastries | $200,000 | $120,000 |
Sandwiches | $90,000 | $50,000 |
Chris is considering converting the sandwiches area into an expanded coffee area.
Required: a. By how much must the coffee segment margin increase to maintain Chris’s Coffee’s current income? b. Discuss other factors Chris should consider before deciding to eliminate the sandwiches area to expand coffee.
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Advanced Financial Accounting
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
10th edition
78025621, 978-0078025624
