ER 8 Serial Case C8-60 Decide whether to discontinue a department (Learning s case is a continuation of the Caesars Entertainment Corporation serial case in Chapter 1. Refer to the introductory story in Chapter 1 (see page began additional background. (The components of the Caesars serial case can be com- pleted in any order.) What follows are the income statements for Caesars Entertainment Corporation for the three years ending December 31, 2012 through 2014, Caesars Entertainment Corporation Consolidated Statements of Operations (Condensed and adapted) In millions, except per share date Years ended December 31, 2014 2013 2012 Revenues Casino revenue Food and beverage revenue Rooms revenue Other revenues $ 5,418 5,529 5,916 1,438 1,147 1,522 1,207 1,451 1,167 362 73 (315) Net revenues $8,516 3,253 694 8,220 8,186 Operating Expenses Direct casino expenses Direct food and beverage expenses Direct rooms expenses Miscellaneous expenses 3,112 3,368 639 634 289 4706 6.199 3.761 $8.968 10.246 8.052 $134 315 296 Total operating expenses Income/(loss) from operations $ 2,026 Requirements: Note: To answer these questions, calculate a segment margin for each of the depart- ments. For the purpose of this case only, calculate segment margin as revenues less di- rect expenses. (We are modifying the concept of segment margin slightly here, given the information that is publicly available. We are essentially assuming that the direct expenses are the variable expenses.) Using the statements of operations (income statements) given, answer the following questions 1. Calculate the segment margin for the three departments: Casinos, Food and Bever- 2. Given the segment margins that you calculated, should Caesars discontinue any of 3. What expenses are likely to be included in "Miscellaneous expenses"? Should these age, and Rooms. the three departments? Why or why not? expenses be allocated to the three departments it Caesars is evaluating whether it should discontinue any departments? Why or why not