Pat's Pet Supplies evaluates the profitability of three segments: pet food, accessories, and grooming services. The...
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Accounting
Pat's Pet Supplies evaluates the profitability of three segments: pet food, accessories, and grooming services. The financials are:
Segment | Revenue | Direct Costs |
Pet Food | $500,000 | $300,000 |
Accessories | $200,000 | $120,000 |
Grooming Services | $80,000 | $50,000 |
Pat is considering converting the grooming services area into an expanded pet food area.
Required: a. Determine the necessary increase in the pet food segment margin to maintain Pat’s Pet Supplies’ current income. b. Identify other considerations Pat should evaluate before deciding to eliminate the grooming services area to expand pet food.
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