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 Palaces manager, Jim Jones, relies heavily on radio and billboard advertising, but next years advertising budget is expected to be very limited. Information on projected operations for next year follows.

	Grooming	Training
Revenue per billable hour	$50	$70
Variable cost of labor	$20	$41
Material cost per billable hour	$6	$7
Allocated fixed cost per year	$350,000	$364,000
Projected billable hours for the year	42,000	28,000

a. What is Pet Palaces projected pre-tax profit (or loss) for next year? $Answer

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? AnswerGroomingTraining 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? AnswerGroomingTraining