Reference no: EM13339777
Dropping a segment - George's Grill analyzes profitability of three operating units: restaurant, bar, and billiards room. Revenues, variable costs, and attributable fixed costs (which can be avoided if the unit is eliminated) for each unit are as follows:
Restaurant Bar Billiards Rm
Revenue $320,000 $150,000 $40,000
Variable costs 120,000 35,000 10,000
Attributable fixed costs 80,000 25,000 15,000
George the owner, is considering converting the billiards area into an expanded bar area.
a) Ignoring remodeling costs, by how much will the bar segment margin have to increase for the grill's income to be at least as high as it is now?
b) What other considerations will George want to consider before making the decision to eliminate the billiards unit to expand the bar area?
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