Sophia's Salon evaluates the profitability of three segments: haircuts, coloring, and spa treatments. The financials are:SegmentRevenueDirect...
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Accounting
Sophia's Salon evaluates the profitability of three segments: haircuts, coloring, and spa treatments. The financials are:
Segment | Revenue | Direct Costs |
Haircuts | $500,000 | $300,000 |
Coloring | $200,000 | $120,000 |
Spa Treatments | $80,000 | $50,000 |
Sophia is considering converting the spa treatments area into an expanded coloring area.
Required: a. By how much must the coloring segment margin increase to maintain Sophia’s Salon’s current income? b. Discuss other factors Sophia should consider before deciding to eliminate the spa treatments area to expand coloring.
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