Question

Problem 4 

Pet Hotel, Inc. operates three luxury pet boarding facilities and expects the following results for the coming year. 

(picture )

 

Answer each of the following questions independently. 

1. Fixed costs are all allocated and unavoidable. What will happen to profit if Pet Hotel discontinues operations at Pet Spa? 

2. Suppose now that $25,000 of the fixed costs shown for Pet Spa is avoidable. What will happen to total profits if Pet Hotel discontinues operations at Pet Spa?

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