Sophia's Salon evaluates the profitability of three segments: haircuts, coloring, and spa treatments. The financials are:SegmentRevenueDirect...
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Accounting
Sophia's Salon evaluates the profitability of three segments: haircuts, coloring, and spa treatments. The financials are:
Segment
Revenue
Direct Costs
Haircuts
$500,000
$300,000
Coloring
$200,000
$120,000
Spa Treatments
$80,000
$50,000
Sophia is considering converting the spa treatments area into an expanded coloring area.
Required: a. By how much must the coloring segment margin increase to maintain Sophia’s Salon’s current income? b. Discuss other factors Sophia should consider before deciding to eliminate the spa treatments area to expand coloring.
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