Question
Jake's Jewelry evaluates the profitability of three segments: rings, necklaces, and watches. The financials are: Segment Revenue Direct Costs Rings $500,000 $300,000 Necklaces $200,000 $120,000
Jake's Jewelry evaluates the profitability of three segments: rings, necklaces, and watches. The financials are:
Segment | Revenue | Direct Costs |
Rings | $500,000 | $300,000 |
Necklaces | $200,000 | $120,000 |
Watches | $90,000 | $50,000 |
Jake is considering converting the watches area into an expanded rings area.
Required: a. By how much must the rings segment margin increase to maintain Jake’s Jewelry’s current income? b. Discuss other factors Jake should consider before deciding to eliminate the watches area to expand rings.
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Advanced Financial Accounting
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
10th edition
78025621, 978-0078025624
