Purpose: 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 muth$-$part question. There are ho minimith word counts but you must answer the question in fill.

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 exclusively horror$-$themed escape rooms and the location barely breaks even. The revenue and costs for the horror$-$themed escape room are below. You are evaluating 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 $25\%$

variable stafing and merchandise costs will increase by $2\%($increased labor costs because we need tech$-$savry staff to fix glitches$)$

variable selling expenses remain unchanged

fixed costs increase by $$60,000($this is the cost of the virtual reality equipment$)$

Part $1$: Prepare twodifferential 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. Describeyour plan to increase profitability.

Discussion Response Due by Saturday. Review another student's fourth option $($Part $2)$ and evaluate their profitability plan.

$\backslash$table$[[$Continue$/$Discontinue$,$Continue,Discontinus,$\backslash$table$[[$Differential$],[$Effects$]]],[$Revenue$,$$$500,000,,],[$Costs$,,,],[$Variablestaffing and merchandise expenses,$($$$325,000),,],[$Variableselling expenses,$($$$100,000),,],[$Fixed costs,$($$$74,100),,],[$Profit$($loss$),$$$900,00,,]]$

$\backslash$table$[[$Continue$/$vilfon Dollar Listing,Continue,Million Dollar",Differential Effects$],[$Revenue$,$$$500,000,,],[$Costs$,,,],[$Variable stafing and merchandise expenses,$($$$325,000),,],[$Variable selling expenses,$($$$100,000),,],[$Fixed costs,$($$$74,100),,],[$Profit$($loss$),$$$900\mathrm{.}00,,]]$