Abby 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 Abby 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. Abby estimates her variable costs to expand her business will be $10 per grooming and her fixed costs are $10,000. How much profit would Abby make on this new segment?
A)$72,240
B)$98,000
C)$108,000
D)$128,000
E)$410,000

Question

Quizplus · Accepted Answer

First, calculate the number of homes likely to use the service: 2,000 homes * 20% = 400 homes. Then, calculate the total revenue: 400 homes * 6 times/year * $45 = $108,000. Next, calculate the total variable costs: 400 homes * 6 times/year * $10 = $24,000. Subtract the total costs (variable + fixed) from the total revenue to find the profit: $108,000 - $24,000 - $10,000 = $74,000. However, due to a calculation error in the final step, the correct profit calculation should be: $108,000 (total revenue) - $24,000 (total variable costs) - $10,000 (fixed costs) = $74,000. The correct answer based on the provided choices should be closest to this corrected calculation, indicating a mistake in the final profit figure provided.

Abby Is Looking to Expand Her Pet Grooming Business and Wants