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David's Deli analyzes profitability of three segments: sandwiches, drinks, and desserts. The financial data are:SegmentRevenueDirect CostsSandwiches$350,000$200,000Drinks$100,000$60,000Desserts$50,000$30,000David...

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Accounting

David's Deli analyzes profitability of three segments: sandwiches, drinks, and desserts. The financial data are:

Segment

Revenue

Direct Costs

Sandwiches

$350,000

$200,000

Drinks

$100,000

$60,000

Desserts

$50,000

$30,000

David is considering converting the dessert area into an expanded drinks area.

Required: a. By how much must the drinks segment margin increase to maintain David’s Deli’s current income? b. What other factors should David consider before making the decision to eliminate the desserts segment to expand the drinks area?

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