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Linda's Laundry evaluates the profitability of three segments: wash and fold, dry cleaning, and alterations. The financials are: Segment Revenue Direct Costs Wash and Fold

Linda's Laundry evaluates the profitability of three segments: wash and fold, dry cleaning, and alterations. The financials are:

Segment

Revenue

Direct Costs

Wash and Fold

$200,000

$120,000

Dry Cleaning

$150,000

$90,000

Alterations

$50,000

$30,000

Linda is considering converting the alterations area into an expanded dry cleaning area.

Required: a. By how much must the dry cleaning segment margin increase to maintain Linda’s Laundry’s current income? b. Discuss other factors Linda should consider before deciding to eliminate the alterations area to expand dry cleaning.

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