CAT decision alternatives Dusty Baker owns a sports brokerage agency and sells tickets to major league baseball, football, and basketball games. He also sells sports travel packages that include game tickets, airline tickets, and ho¬ tel accommodations. Revenues are commissions based as follows:

a. What is Baker’s normal monthly profit or loss?

b. Baker estimates that airline bookings can be increased by 40 percent if he increases advertising by $600. Should he increase advertising?
C. Baker’s friend Ozzi has asked him for a job in the travel agency. Ozzi has proposed that he be paid 50 percent of whatever additional com¬ missions he can bring to the agency plus a salary of $400 per month. Baker has estimated that Ozzi can generate the following additional bookings per month:

Hiring Ozzi would also increase fixed costs by $400 per month for his salary. Should Baker hire Ozzi?

d. Baker hired Ozzi and in the first month Ozzi generated an additional $8,000 of bookings for the agency. The bookings, however, were all air¬ line tickets. Was the decision to hire Ozzi a good one? Why or why not?

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Game ticket sales Airline ticket sales Hotel bookings sales 8% commission 10% commission 20% commission Monthly fixed costs include advertising ($1,100), rent ($900), utilities ($250), and other costs ($2,200). There are no variable costs. A typical month generates the following sales amounts that are subject to the stated commission structure: $30,000 4,500 Game tickets Airline tickets Hotel bookings 7,000 Total $41,500