David Austin recently purchased a chain of dry cleaners innorthern Wisconsin. Although the business is making amodest profit now, David suspects that if he invests in a new press, he could recognize a substantial increase in profits.The new press costs $15,400 to purchase and install and canpress 40 shirts an hour (or 320 per day). David estimatesthat with the new press, it will cost $0.25 to launder andpress each shirt. Customers are charged $1.10 per shirt.a. How many shirts will David have to press to break even?b. So far, David’s workload has varied from 50 to 200shirts a day. How long would it take to break even on the new press at the low-demand estimate? at the high-demand estimate? c. If David cuts his price to $0.99 a shirt, he expects to beable to stabilize his customer base at 250 shirts per day.How long would it take to break even at the reducedprice of $0.99? Should David cut his price and buy thenew press?
David Austin recently purchased a chain of dry cleaners in
northern Wisconsin. Although the business is making a
modest profit now, David suspects that if he invests in a new
press, he could recognize a substantial increase in profits.
The new press costs $15,400 to purchase and install and can
press 40 shirts an hour (or 320 per day). David estimates
that with the new press, it will cost $0.25 to launder and
press each shirt. Customers are charged $1.10 per shirt.
a. How many shirts will David have to press to break even?
b. So far, David’s workload has varied from 50 to 200
shirts a day. How long would it take to break even on
the new press at the low-demand estimate? at the high-
demand estimate?
c. If David cuts his price to $0.99 a shirt, he expects to be
able to stabilize his customer base at 250 shirts per day.
How long would it take to break even at the reduced
price of $0.99? Should David cut his price and buy the
new press?
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