Question
Ella's Electronics evaluates the profitability of three segments: computers, phones, and accessories. The financials are: Segment Revenue Direct Costs Computers $500,000 $300,000 Phones $200,000 $120,000
Ella's Electronics evaluates the profitability of three segments: computers, phones, and accessories. The financials are:
Segment | Revenue | Direct Costs |
Computers | $500,000 | $300,000 |
Phones | $200,000 | $120,000 |
Accessories | $80,000 | $50,000 |
Ella is considering converting the accessories area into an expanded computers area.
Required: a. By how much must the computers segment margin increase to maintain Ella’s Electronics’ current income? b. Discuss other factors Ella should consider before deciding to eliminate the accessories area to expand computers.
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Advanced Financial Accounting
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
10th edition
78025621, 978-0078025624
