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Tom's Toys evaluates the profitability of three segments: action figures, dolls, and board games. The financials...

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Accounting

Tom's Toys evaluates the profitability of three segments: action figures, dolls, and board games. The financials are:

Segment

Revenue

Direct Costs

Action Figures

$500,000

$300,000

Dolls

$200,000

$120,000

Board Games

$90,000

$50,000

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

Required: a. Calculate the necessary increase in the action figures segment margin to maintain Tom’s Toys’ current income. b. Identify other considerations Tom should evaluate before deciding to eliminate the board games area to expand action figures.

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