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Linda's Luxuries is assessing the profitability of three segments: jewelry, watches, and handbags. The financials are:SegmentRevenueDirect...

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Accounting

Linda's Luxuries is assessing the profitability of three segments: jewelry, watches, and handbags. The financials are:

Segment

Revenue

Direct Costs

Jewelry

$600,000

$360,000

Watches

$150,000

$90,000

Handbags

$70,000

$40,000

Linda is considering converting the handbags area into an expanded jewelry area.

Required: a. Calculate the necessary increase in the jewelry segment margin to maintain Linda’s Luxuries’ current income. b. Identify other considerations Linda should evaluate before deciding to eliminate the handbags area to expand jewelry.

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