Question: Continue or discontinue a segment? MMV Inc. Opened a chain of business several years ago that provide quick oil changes and other minor services

Continue or discontinue a segment? MMV Inc. Opened a chain of business

Continue or discontinue a segment? MMV Inc. Opened a chain of business several years ago that provide quick oil changes and other minor services in conjunction with a convenience operation consisting of a soup, sandwich, and snack bar. The strategy was that as customers brought autos in for oil changes, they would likely use the convenience operation to purchase a sandwich, bowl of soup, beverage, or some other snack while they were waiting for the work to be completed on their autos. The oil change operation occupies 75% of the facility and includes three service bays. The soup, sandwich, and snack bar occupies the remaining 25%. A general manager is responsible for the entire operation, but each segment also has a manager responsible for its individual operation. Recently,the following annual operating information for the soup, sandwich, and snack bar at one of MMV's locations caught the general manager's attention. Sales for the year were $120,000, and cost of sales (food, beverages, and snack items) are 40% of sales revenue. Operating expense information for the convenience operation follows: Food service $ 1,800 items (spoons, napkins, etc.) Utilities ...... 3,600 Wages for part- 24,000 time employees Convenience 33,000 operation manager's salary General 9,000 manager's salary Advertising.... 10,800 Insurance 6,000 Property taxes.. 1,500 Food equipment 3,000 depreciation Building depreciation 7,500

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