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Bella's Bistro is analyzing the profitability of three segments: café, bakery, and catering. Revenues and direct...

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Accounting

Bella's Bistro is analyzing the profitability of three segments: café, bakery, and catering. Revenues and direct costs (variable plus fixed costs) for each segment are as follows:

Segment

Revenue

Direct Costs

Café

$400,000

$250,000

Bakery

$200,000

$120,000

Catering

$60,000

$40,000

Bella, the owner, is considering converting the bakery area into an expanded café area.

Required: a. Based on segment margin analysis, by how much will the café segment margin have to increase for Bella’s Bistro’s income to be at least as high as it is now? b. What other considerations should Bella take into account before making the decision to eliminate the bakery to expand the café area?

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