Leo's Lounge evaluates the profitability of three segments: live music, bar, and private parties. The financials...
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Accounting
Leo's Lounge evaluates the profitability of three segments: live music, bar, and private parties. The financials are:
Segment | Revenue | Direct Costs |
Live Music | $500,000 | $300,000 |
Bar | $200,000 | $120,000 |
Private Parties | $90,000 | $50,000 |
Leo is considering converting the private parties area into an expanded bar area.
Required: a. By how much must the bar segment margin increase to maintain Leo’s Lounge’s current income? b. Discuss other factors Leo should consider before deciding to eliminate the private parties area to expand the bar area.
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