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 Palace's 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 Allocated fixed cost per year Projected billable hours for the year Grooming Training $50 $70 $20 $41 $6 $7 $700,000 $728,000 84,000 56,000 a. What is Pet Palace's projected pre-tax profit (or loss) for next year? $ 910,000 X 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? Grooming ✔ 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? Grooming

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 Palace's 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 Allocated fixed cost per year Projected billable hours for the year Grooming Training $50 $70 $20 $41 $6 $7 $700,000 $728,000 84,000 56,000 a. What is Pet Palace's projected pre-tax profit (or loss) for next year? $ 910,000 X 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? Grooming ✔ 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? Grooming

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter1: Introduction To Finance For Entrepreneurs

Section: Chapter Questions

Problem 6SEP

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