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Mike's Multiplex analyzes profitability of three segments: movies, arcade, and snack bar. Revenues and direct costs...

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Accounting

Mike's Multiplex analyzes profitability of three segments: movies, arcade, and snack bar. Revenues and direct costs for each segment are as follows:

Segment

Revenue

Direct Costs

Movies

$500,000

$300,000

Arcade

$150,000

$90,000

Snack Bar

$80,000

$50,000

Mike is considering converting the arcade area into an expanded snack bar area.

Required: a. Calculate the necessary increase in the snack bar segment margin to maintain the current total income of Mike's Multiplex. b. Discuss other factors Mike should consider before deciding to eliminate the arcade to expand the snack bar area.

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