Question
Sophia's Spa evaluates the profitability of three segments: massages, facials, and nail services. The financials are: Segment Revenue Direct Costs Massages $500,000 $300,000 Facials $200,000
Sophia's Spa evaluates the profitability of three segments: massages, facials, and nail services. The financials are:
Segment | Revenue | Direct Costs |
Massages | $500,000 | $300,000 |
Facials | $200,000 | $120,000 |
Nail Services | $80,000 | $50,000 |
Sophia is considering converting the nail services area into an expanded massages area.
Required: a. Calculate the necessary increase in the massages segment margin to maintain Sophia’s Spa’s current income. b. Identify other considerations Sophia should evaluate before deciding to eliminate the nail services area to expand massages.
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Accounting for Decision Making and Control
Authors: Jerold Zimmerman
8th edition
978-0078025747
