Linda's Laundry evaluates the profitability of three segments: wash and fold, dry cleaning, and alterations. The...
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Accounting
Linda's Laundry evaluates the profitability of three segments: wash and fold, dry cleaning, and alterations. The financials are:
Segment | Revenue | Direct Costs |
Wash and Fold | $200,000 | $120,000 |
Dry Cleaning | $150,000 | $90,000 |
Alterations | $50,000 | $30,000 |
Linda is considering converting the alterations area into an expanded dry cleaning area.
Required: a. By how much must the dry cleaning segment margin increase to maintain Linda’s Laundry’s current income? b. Discuss other factors Linda should consider before deciding to eliminate the alterations area to expand dry cleaning.
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