FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Baffled Car Rental Agency is owned by a former race car driver with psychic powers. Baffled has two classes of rentals, short-term and long-term. Short-term rentals are in the customer's hands for only one half of a week, but long-term rentals are in the customer's hands for two weeks. Our psychic friend currently rents an average of 200 cars to his short termers and 100 cars to long-term customers each week.
Short-term renters pay $200 per week and long-term renters pay $120 per week. Regardless of whether the rental is short-term or long-term, a rental return follows the same process steps; it is checked in and routed either to Baffled's garage for repairs (about 20% of the cars) or straight to Baffled's cleaning facility for washing and vacuuming (the remaining 80% of the cars).
On average, about 100 cars are waiting to be cleaned for an average cost of $10 per car. Cars needing repairs spend an average of two weeks in the repair shop waiting for mechanics to effect repairs at an average cost of $130 per car.
Assume that the cars are rented as soon as they have been either cleaned or repaired.
- What profit does Baffled make in a week if each car loses $50 per week in
depreciation ?
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