Zen Salon Inc. provides two types of salon services: manicures and facials. All company personnel can perform each service equally well. To expand sales and market share, Zen Salon's manager relies heavily on local internet marketing advertising, but the annual advertising budget is expected to be very limited. Information on projected operations for the year follows.

a. What is Zen Salon's projected pre-tax profit (or loss) for the year?

b. If \(\$ 1\) spent on advertising could increase manicure revenue by \(\$ 20\) or facial revenue by \(\$ 20\), on which service should the advertising dollar be spent?

c. If \(\$ 1\) spent on advertising could increase either manicure billable time or facial billable time by one hour, on which service should the advertising dollar be spent?

Transcribed Image Text:

Revenue per billable hour. Variable cost of labor. Material cost per billable hour. Allocated fixed cost per year Projected billable hours for the year. Manicures Facials $ 60 $ 84 24 50 7 8 125,000 90,000 15,000 8,000