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 hotel accommodations.

Revenues are commissions based as follows:

Game ticket sales Airline ticket sales Hotel bookings sales

8% commission 10% commission 20% commission

Monthly fixed costs include the following items: Advertising $1,100

Rent $900

Utilities $250

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:

Game tickets Airline tickets Hotel bookings

Required:

$30,000 $4,500 $7,000

1.Determine Baker's normal monthly profit (loss).

The following questions are independent of each other:

2. Baker estimates that airline bookings can be increased by 40% if he increases advertising by $600. Should he increase advertising? Justify your answer.