Question
Sarah's Spa is assessing the profitability of three segments: massages, facials, and retail products. The financials are: Segment Revenue Direct Costs Massages $300,000 $180,000 Facials
Sarah's Spa is assessing the profitability of three segments: massages, facials, and retail products. The financials are:
Segment | Revenue | Direct Costs |
Massages | $300,000 | $180,000 |
Facials | $150,000 | $90,000 |
Retail | $70,000 | $40,000 |
Sarah is contemplating turning the retail space into an additional area for facials.
Required: a. Determine how much the facial segment margin needs to increase to ensure Sarah's Spa’s income remains unchanged. b. Identify other considerations Sarah should evaluate before deciding to eliminate the retail space to expand the facial area.
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Using Financial Accounting Information The Alternative to Debits and Credits
Authors: Gary A. Porter, Curtis L. Norton
9th edition
978-1285183244, 128518324X, 978-1285779263, 1285779266, 978-1285183237
