Question
Sophia's Salon evaluates the profitability of three segments: haircuts, coloring, and spa treatments. The financials are: Segment Revenue Direct Costs Haircuts $500,000 $300,000 Coloring $200,000
Sophia's Salon evaluates the profitability of three segments: haircuts, coloring, and spa treatments. The financials are:
Segment | Revenue | Direct Costs |
Haircuts | $500,000 | $300,000 |
Coloring | $200,000 | $120,000 |
Spa Treatments | $80,000 | $50,000 |
Sophia is considering converting the spa treatments area into an expanded coloring area.
Required: a. Calculate the necessary increase in the coloring segment margin to maintain Sophia’s Salon’s current income. b. Identify other considerations Sophia should evaluate before deciding to eliminate the spa treatments area to expand coloring.
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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
