Question
David's Deli analyzes profitability of three segments: sandwiches, drinks, and desserts. The financial data are: Segment Revenue Direct Costs Sandwiches $350,000 $200,000 Drinks $100,000 $60,000
David's Deli analyzes profitability of three segments: sandwiches, drinks, and desserts. The financial data are:
Segment | Revenue | Direct Costs |
Sandwiches | $350,000 | $200,000 |
Drinks | $100,000 | $60,000 |
Desserts | $50,000 | $30,000 |
David is considering converting the dessert area into an expanded drinks area.
Required: a. By how much must the drinks segment margin increase to maintain David’s Deli’s current income? b. What other factors should David consider before making the decision to eliminate the desserts segment to expand the drinks area?
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Using Financial Accounting Information The Alternative to Debits and Credits
Authors: Gary A. Porter, Curtis L. Norton
9th edition
978-1285183244, 128518324X, 978-1285779263, 1285779266, 978-1285183237
