Rachel's Rentals evaluates the profitability of three segments: cars, trucks, and equipment. The financials are:SegmentRevenueDirect CostsCars$600,000$360,000Trucks$200,000$120,000Equipment$80,000$50,000Rachel...
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Accounting
Rachel's Rentals evaluates the profitability of three segments: cars, trucks, and equipment. The financials are:
Segment | Revenue | Direct Costs |
Cars | $600,000 | $360,000 |
Trucks | $200,000 | $120,000 |
Equipment | $80,000 | $50,000 |
Rachel is considering converting the equipment area into an expanded cars area.
Required: a. By how much must the cars segment margin increase to maintain Rachel’s Rentals’ current income? b. Discuss other factors Rachel should consider before deciding to eliminate the equipment area to expand cars.
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