You run a nail salon. Fixed monthly cost is $5,279.00 for rent and utilities, $6,077.00 is spent in salaries and $1,347.00 in insurance. Also every customer requires approximately $5.00 in supplies. You charge $66.00 on average for each service.
You are considering moving the salon to an upscale neighborhood where the rent and utilities will increase to $11,263.00, salaries to $6,148.00 and insurance to $2,161.00 per month. Cost of supplies will increase to $7.00 per service. However you can now charge $149.00 per service. At what point will you be indifferent between your current location and the new loaction?
Let P be the point of indifference:
[P X ($66 - $5)] - $5,279 - $6,077 - $1,347 = [P X ($149 - $7)] - $11,263 - $6,148 - $2,161
P = 85
At 85 you will be indifferent between your current location and the new loaction
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