Question
Tom's Tech evaluates the profitability of three segments: laptops, desktops, and accessories. The financials are: Segment Revenue Direct Costs Laptops $500,000 $300,000 Desktops $200,000 $120,000
Tom's Tech evaluates the profitability of three segments: laptops, desktops, and accessories. The financials are:
Segment | Revenue | Direct Costs |
Laptops | $500,000 | $300,000 |
Desktops | $200,000 | $120,000 |
Accessories | $90,000 | $50,000 |
Tom is considering converting the accessories area into an expanded laptops area.
Required: a. By how much must the laptops segment margin increase to maintain Tom’s Tech’s current income? b. Discuss other factors Tom should consider before deciding to eliminate the accessories area to expand laptops.
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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
