Question
Peter's Pet Palace evaluates the profitability of three segments: pet supplies, grooming, and boarding. The financials are: Segment Revenue Direct Costs Pet Supplies $500,000 $300,000
Peter's Pet Palace evaluates the profitability of three segments: pet supplies, grooming, and boarding. The financials are:
Segment | Revenue | Direct Costs |
Pet Supplies | $500,000 | $300,000 |
Grooming | $200,000 | $120,000 |
Boarding | $80,000 | $50,000 |
Peter is considering converting the boarding area into an expanded pet supplies area.
Required: a. By how much must the pet supplies segment margin increase to maintain Peter’s Pet Palace’s current income? b. Discuss other factors Peter should consider before deciding to eliminate the boarding area to expand pet supplies.
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Cost management a strategic approach
Authors: Edward J. Blocher, David E. Stout, Gary Cokins
5th edition
73526940, 978-0073526942
