Sophie's Spa analyzes profitability of three segments: massages, facials, and yoga classes. The financials are:SegmentRevenueDirect CostsMassages$300,000$180,000Facials$150,000$90,000Yoga...
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Accounting
Sophie's Spa analyzes profitability of three segments: massages, facials, and yoga classes. The financials are:
Segment | Revenue | Direct Costs |
Massages | $300,000 | $180,000 |
Facials | $150,000 | $90,000 |
Yoga Classes | $70,000 | $40,000 |
Sophie is considering converting the yoga classes area into an expanded massages area.
Required: a. By how much must the massages segment margin increase to maintain Sophie’s Spa’s current income? b. Discuss other factors Sophie should consider before deciding to eliminate the yoga classes area to expand massages.
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