Purpose: Evaluate whether to continue or discontinue a segment; explain the business ramifications of your decision KSAs: Understand and apply differential analysis Points: 20 Admin: This is a multi-part question. There are no minimum word counts but you must answer the question in full. Discussion Initial Response Due by Wednesday: You own Paradox Escape Room Ltd and have 3 locations in the local area. One of the locations is exclusive horror-themed escape rooms and the location barely breaks even. The revenue and costs for the horror-themed escape room are below. You are evalua whether to close the horror-themed location or change it to a "Million Dollar Listing Virtual Reality" escape room. The "Million Dollar Listing" option forecasts the following changes to operation revenues and expenses: - revenues will increase by 13% - variable staffing and merchandise costs will increase by 6% - variable selling expenses will increase by 1% - fixed costs increase by $11,000 - variable selling expenses remain unchanged Part 1: Prepare two differential analyses. Remember that each analysis will compare the current situation to the change. Show your work. - Analysis \#1 will determine if the horror-themed locations should be continued or discontinued. - Analysis \#2 will determine if the horror-themed location should be changed to a "Million Dollar Listing Virtual Reality" theme. Part 2: As the financial analyst, you believe there is a fourth option to make the escape room more profitable. Describe your plan to increase profitability Discussion Response Due by Saturday: Review another student's fourth option (Part 2) and evaluate their profitability plan. \begin{tabular}{|c|c|c|c|} \hline Continue/Discontinue & Continue & Discontinue & Differential Effects \\ \hline Revenue & $410,000 & & \\ \hline \multicolumn{4}{|l|}{ Costs } \\ \hline Variable staffing and merchandise expenses & ($241,000) & & \\ \hline Variable selling expenses & ($87,400) & & \\ \hline Fixed costs & ($74,100) & & \\ \hline Profit (loss) & $7,500.00 & & \\ \hline Continue/Million Dollar Listing & Continue & "Million Dollar" & Differential Effects \\ \hline Revenue & $410,000 & & \\ \hline \multicolumn{4}{|l|}{ Costs } \\ \hline Variable staffing and merchandise expenses & ($241,000) & & \\ \hline Variable selling expenses & ($87,400) & & \\ \hline Fixed costs & ($74,100) & & \\ \hline Profit (loss) & $7,500.00 & & \\ \hline \end{tabular}