#2 The manager of a car wash must decide whether to have one or two wash...
#2 The manager of a car wash must decide whether to have one or two wash lines. One line will mean a fixed cost of $6,500 a month, and two lines will mean a fixed cost of $11,000 a month. Each line would be able to process 14 cars an hour. Variable costs will be $4 per car, and revenue will be $5.95 per car. The manager projects an average demand of between 14 and 18 cars an hour. Would you recommend one or two lines? The car wash is open 300 hours a month.
Homework Answers
In case of One lIne
The Expense would be = Fixed cost + Variable cost
= 6500 + 14*4*300
= 6500 + 16800
= $23300
Revenue = Number of cars processed per hour * Total hours open * Revenue per car
= 14*300*5.95
= $24990
Profit = Revenue - Expense
= (24990-23300)
= $1690
In case of two lines
Expense = 11000 + (14*2*4*300)
= 11000+33600
= $44600
Revenue = 14*2*300*5.95
= $49980
Profit = (49980-44600)
= $5380
I would recommend two lines as the profit for the same is more.
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