Ella's Eatery evaluates the profitability of three segments: breakfast, lunch, and dinner. The financials are:SegmentRevenueDirect CostsBreakfast$300,000$180,000Lunch$200,000$120,000Dinner$100,000$60,000Ella...
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Accounting
Ella's Eatery evaluates the profitability of three segments: breakfast, lunch, and dinner. The financials are:
Segment
Revenue
Direct Costs
Breakfast
$300,000
$180,000
Lunch
$200,000
$120,000
Dinner
$100,000
$60,000
Ella is considering converting the breakfast area into an expanded lunch area.
Required: a. By how much must the lunch segment margin increase to maintain Ella’s Eatery’s current income? b. Discuss other factors Ella should consider before deciding to eliminate the breakfast area to expand lunch.
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