The Battle of Canine Grooming Salons: Elegant Dogs vs Dazzling Dogs
Comparing Elegant Dogs and Dazzling Dogs
Elegant Dogs and Dazzling Dogs are competing canine grooming salons, each currently serving 4,500 customers per year. Both companies charge $35 to groom a dog. Elegant Dogs pays its dog groomers fixed salaries, with a total expense of $45,000 per year. Dazzling Dogs, on the other hand, pays its groomers $10 per dog groomed. Elegant Dogs has managed to lure 2,000 customers from Dazzling Dogs.
Which of the Following is True?
Elegant Dogs will experience an increase in profit after luring 2,000 customers from Dazzling Dogs.
This is because they are paying their dog groomers fixed salaries, totaling $45,000 per year, while Dazzling Dogs pays its groomers $10 per dog groomed. With 2,000 more customers, Elegant Dogs will generate an additional $70,000 in revenue ($35 x 2,000), which will more than cover the cost of their groomers' salaries.
Profit is the money left after paying for business expenses. There are three main types of profit: gross profit, operating profit, and net profit. Gross profit is the largest and shows the money left after paying for goods and services sold.
What are the advantages of Elegant Dogs paying fixed salaries to its groomers compared to Dazzling Dogs paying per dog groomed? Elegant Dogs having fixed salaries for its groomers provides stability in expenses and allows for better financial predictability. This payment structure also incentivizes groomers to focus on quality rather than quantity, leading to better customer satisfaction and potentially higher profits in the long run.