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Tim's Toy Store is analyzing the profitability of three segments: action figures, dolls, and board games....

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Accounting

Tim's Toy Store is analyzing the profitability of three segments: action figures, dolls, and board games. The financials are:

Segment

Revenue

Direct Costs

Action Figures

$400,000

$240,000

Dolls

$150,000

$90,000

Board Games

$60,000

$40,000

Tim is considering converting the board games area into an expanded action figures area.

Required: a. Calculate the increase in the action figures segment margin needed to maintain Tim’s Toy Store’s current income. b. What other considerations should Tim take into account before deciding to eliminate the board games area to expand action figures?

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