Justin will make a profit of $98,000 on his new segment. Justin's potential profit in the new market can be estimated by multiplying the number of potential customers (2,000 homes x 20% = 400) by the number of services. Profit is the excess of revenue over expenses. It represents the value created by a business after accounting for all expenses associated with producing and selling its goods and services.
They are likely to use (400 x 6 = 2,400) and then subtracting Justin's estimated variable and fixed costs. 400 x 6 = 2,400 grooms x $45/groom = $108,000 in gross profit. Subtracting Justin's estimated variable costs ($10/groom x 2,400 grooms = $24,000) and fixed costs ($10,000) results in $98,000 in potential profit for Justin's pet grooming business.
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