Ella's Eatery evaluates the profitability of three segments: breakfast, lunch, and dinner. The financials are:SegmentRevenueDirect CostsBreakfast$400,000$240,000Lunch$200,000$120,000Dinner$80,000$50,000Ella...
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Accounting
Ella's Eatery evaluates the profitability of three segments: breakfast, lunch, and dinner. The financials are:
Segment | Revenue | Direct Costs |
Breakfast | $400,000 | $240,000 |
Lunch | $200,000 | $120,000 |
Dinner | $80,000 | $50,000 |
Ella is considering converting the dinner area into an expanded lunch area.
Required: a. By how much must the lunch segment margin increase to maintain Ella’s Eatery’s current income? b. Discuss other factors Ella should consider before deciding to eliminate the dinner area to expand lunch.
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