Question
Holly's Home Goods evaluates the profitability of three segments: furniture, decor, and kitchenware. The financials are: Segment Revenue Direct Costs Furniture $600,000 $360,000 Decor $200,000
Holly's Home Goods evaluates the profitability of three segments: furniture, decor, and kitchenware. The financials are:
Segment | Revenue | Direct Costs |
Furniture | $600,000 | $360,000 |
Decor | $200,000 | $120,000 |
Kitchenware | $80,000 | $50,000 |
Holly is considering converting the kitchenware area into an expanded furniture area.
Required: a. By how much must the furniture segment margin increase to maintain Holly’s Home Goods’ current income? b. Discuss other factors Holly should consider before deciding to eliminate the kitchenware area to expand furniture.
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Management Accounting
Authors: Will Seal, Carsten Rohde, Ray Garrison, Eric Noreen
6th Edition
0077185536, 978-0077185534
