Fiona is looking to expand her pet grooming business and wants to evaluate the profitability of a potential new market.The area she is looking at has 2,000 homes and Fiona estimates that 20 percent of them would be likely to use her service.She charges $45 per grooming and on average customers groom their pets six times a year.Fiona estimates her variable costs to expand her business will be $10 per grooming and her fixed costs are $10 ,000.How much profit would Fiona make on this new segment?
A) $72,240
B) $98,000
C) $108,000
D) $128,000
E) $410,000

Question

Quizplus · Accepted Answer

Fiona's estimated customer base is 20% of 2,000 homes, which is 400 homes. At an average of 6 groomings per year at $45 each, the revenue per customer is $270 annually. For 400 customers, total revenue is $108,000 (400 * $270). Variable costs are $10 per grooming, so for 6 groomings per year per customer, the total variable cost is $60 per customer annually, or $24,000 for all 400 customers (400 * $60). Subtracting the total variable costs ($24,000) and fixed costs ($10,000) from the total revenue ($108,000) gives a profit of $74,000. However, the correct calculation should be: Revenue = 400 homes * 6 groomings * $45 = $108,000. Total variable costs = 400 homes * 6 groomings * $10 = $24,000. Profit = Revenue - Variable Costs - Fixed Costs = $108,000 - $24,000 - $10,000 = $74,000. None of the provided options correctly matches the calculated profit, indicating a possible mistake in the calculation or the interpretation of the options. The closest provided option is A) $72,240, but it does not match the calculated profit of $74,000, suggesting a need for reevaluation of the calculation or the provided options.

Fiona Is Looking to Expand Her Pet Grooming Business and Wants