Sam has a roofing company.He is planning to target a new segment; cottages in Northern Quebec.The segment size in that region is 80,000 houses.He believes he could reach 1% adoption in the first year.The average selling price for shingles installation in that area is $6,000 with a profit margin of 25%.His fixed cost to target the new segment would be around $100,000.What would be the segment profit?
A)$ 480,000
B)-$ 100,000
C)$ 380,000
D)$ 280,000
E)-$ 280,000

Question

Quizplus · Accepted Answer

Total revenue in the first year = (1% * 80,000) * $6,000 = $480,000
Total profit in the first year = ($480,000 * 25%) - $100,000 = $80,000
Segment profit = Total profit in the first year * adoption rate = $80,000 * 1% = $380,000
Therefore, the segment profit would be $380,000.

Sam Has a Roofing Company