1. Jared is looking to expand his lawn-mowing business and wants to evaluate the
ID: 1103208 • Letter: 1
Question
1. Jared is looking to expand his lawn-mowing business and wants to evaluate the profitability of a potential new market. The area he is looking at has 400 homes and Jared estimates that 10 percent of them would be likely to use his service. He charges $25 per mowing and on average customers mow their lawns 20 times a year. Jared estimates the variable costs to expand his business will be $5 per mowing and his fixed costs are $2,000. How much profit would Jared make on this new segment? Show the steps of your calculation. (3pts) 2. Which of the segmentation attractiveness criteria is addressed when Magnolia Café asks the question, "Are there enough employees in the government center to justify targeting the center for lunch delivery service?" (1pt) 3. Which of the segmentation attractiveness criteria is addressed when Magnolia Pizzeria asks the question, "Are private food service companies allowed to deliver pizzas on the military base?" (1 pt)Explanation / Answer
1. Estimate the likely number of customers who would use the service
=400*0.1=40
2. Estimate fixed cost and variable cost
FC+VC=TC
2000+(5*40*20)
= 6000
3. Estimate expected Revenue
Revenue = 40*20*25
=20000
4. Deduct Revenue from Cost to get profit
Profit = Revenue-TC
= 20000-6000
=$14000
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