Sophia's Spa evaluates the profitability of three segments: massages, facials, and yoga classes. The financials are:SegmentRevenueDirect...
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Accounting
Sophia's Spa evaluates the profitability of three segments: massages, facials, and yoga classes. The financials are:
Segment | Revenue | Direct Costs |
Massages | $500,000 | $300,000 |
Facials | $200,000 | $120,000 |
Yoga Classes | $80,000 | $50,000 |
Sophia is considering converting the yoga classes area into an expanded massages area.
Required: a. Calculate the necessary increase in the massages segment margin to maintain Sophia’s Spa’s current income. b. Identify other considerations Sophia should evaluate before deciding to eliminate the yoga classes area to expand massages.
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