John's Gym is analyzing the profitability of three segments: membership fees, personal training, and merchandise. The...
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Accounting
John's Gym is analyzing the profitability of three segments: membership fees, personal training, and merchandise. The financial data are:
Segment | Revenue | Direct Costs |
Membership Fees | $500,000 | $300,000 |
Personal Training | $150,000 | $90,000 |
Merchandise | $60,000 | $40,000 |
John is considering converting the merchandise area into an expanded personal training area.
Required: a. Calculate the necessary increase in the personal training segment margin to maintain the current total income of John’s Gym. b. Discuss other factors John should consider before deciding to eliminate the merchandise segment to expand personal training.
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