Evaluate whether to continue or discontinue a segment; explain the business ramifications of your decision KSAS:...

  

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Evaluate whether to continue or discontinue a segment; explain the business ramifications of your decision KSAS: Understand and apply differential analysis Points: 20 Admin: This is a multi-part question. There are no minimum word counts but you must answer the question in full. Discussion Initial Response Due by Wednesday: You own Paradox Escape Room Ltd and have 3 locations in the local area. One of the locations is exclusivel horror-themed escape rooms and the location barely breaks even. The revenue and costs for the horror-themed escape room are below. You are evaluat whether to close the horror-themed location or change it to a "Million Dollar Listing Virtual Reality" escape room. The "Million Dollar Listing" option forecasts the following changes to operation revenues and expenses: revenues will increase by 13% • variable staffing and merchandise costs will increase by 6% • variable selling expenses will increase by 1% • fixed costs increase by $11,000 • variable selling expenses remain unchanged Part 1: Prepare two differential analyses. Remember that each analysis will compare the current situation to the change. Show your work. Analysis #1 will determine if the horror-themed locations should be continued or discontinued. Analysis #2 will determine if the horror-themed location should be changed to a "Million Dollar Listing Virtual Reality" theme. Part 2: As the financial analyst, you believe there is a fourth option to make the escape room more profitable. Describe your plan to increase profitability. Discussion Response Due by Saturday: Review another student's fourth option (Part 2) and evaluate their profitability plan. ● ● ● Revenue Costs Continue/Discontinue Variable staffing and merchandise expenses Variable selling expenses Fixed costs Profit (loss) Revenue Costs Continue/Million Dollar Listing Variable staffing and merchandise expenses Variable selling expenses Fixed costs Profit (loss) Continue $410,000 ($ 241,000) ($ 87,400) ($ 74,100) $7,500.00 Continue $410,000 ($ 241,000) ($ 87,400) ($ 74,100) $7,500.00 Discontinue Differential Effects "Million Dollar" Differential Effects Evaluate whether to continue or discontinue a segment; explain the business ramifications of your decision KSAS: Understand and apply differential analysis Points: 20 Admin: This is a multi-part question. There are no minimum word counts but you must answer the question in full. Discussion Initial Response Due by Wednesday: You own Paradox Escape Room Ltd and have 3 locations in the local area. One of the locations is exclusivel horror-themed escape rooms and the location barely breaks even. The revenue and costs for the horror-themed escape room are below. You are evaluat whether to close the horror-themed location or change it to a "Million Dollar Listing Virtual Reality" escape room. The "Million Dollar Listing" option forecasts the following changes to operation revenues and expenses: revenues will increase by 13% • variable staffing and merchandise costs will increase by 6% • variable selling expenses will increase by 1% • fixed costs increase by $11,000 • variable selling expenses remain unchanged Part 1: Prepare two differential analyses. Remember that each analysis will compare the current situation to the change. Show your work. Analysis #1 will determine if the horror-themed locations should be continued or discontinued. Analysis #2 will determine if the horror-themed location should be changed to a "Million Dollar Listing Virtual Reality" theme. Part 2: As the financial analyst, you believe there is a fourth option to make the escape room more profitable. Describe your plan to increase profitability. Discussion Response Due by Saturday: Review another student's fourth option (Part 2) and evaluate their profitability plan. ● ● ● Revenue Costs Continue/Discontinue Variable staffing and merchandise expenses Variable selling expenses Fixed costs Profit (loss) Revenue Costs Continue/Million Dollar Listing Variable staffing and merchandise expenses Variable selling expenses Fixed costs Profit (loss) Continue $410,000 ($ 241,000) ($ 87,400) ($ 74,100) $7,500.00 Continue $410,000 ($ 241,000) ($ 87,400) ($ 74,100) $7,500.00 Discontinue Differential Effects "Million Dollar" Differential Effects

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To evaluate whether to continue or discontinue the horrorthemed escape room and whether to change it to a Million Dollar Listing Virtual Reality theme we need to perform two differential analyses The ... View the full answer