a. What is Pet Palace's projected pre-tax profit (or loss) for next year? $0 b. If $1 spent on advertising could increase grooming revenue by $20 or training revenue by $20, on which service should the advertising dollar be spent? c. If $1 spent on advertising could increase either grooming billable time or training billable time by one hour, on which service should the advertising dollar be spent?
a. What is Pet Palace's projected pre-tax profit (or loss) for next year? $0 b. If $1 spent on advertising could increase grooming revenue by $20 or training revenue by $20, on which service should the advertising dollar be spent? c. If $1 spent on advertising could increase either grooming billable time or training billable time by one hour, on which service should the advertising dollar be spent?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question

Transcribed Image Text:Sales mix
Pet Palace provides two types of services to dog owners: grooming and training. All company personnel can perform each service equally well. To expand sales and market share, Pet Palac
manager, Jim Jones, relies heavily on radio and billboard advertising, but next year's advertising budget is expected to be very limited. Information on projected operations for next year
follows.
Revenue per billable hour
Variable cost of labor
Material cost per billable hour
Grooming Training
$50
$70
$20
$41
$6
$7
$450,000 $468,000
Allocated fixed cost per year
Projected billable hours for the year
54,000 36,000
a. What is Pet Palace's projected pre-tax profit (or loss) for next year? $ 0
b. If $1 spent on advertising could increase grooming revenue by $20 or training revenue by $20, on which service should the advertising dollar be spent?
c. If $1 spent on advertising could increase either grooming billable time or training billable time by one hour, on which service should the advertising dollar be spent?
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