David recently purchased a chain of dry cleaners. 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 hout (or 320 per day) David estimates that with the new press, it will cost 50.25 to launder and press each shirt. Customers are charged $1.10 6 Marks a How many shirts will David have to press to break even? 6. Soft, 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 50.99 a shirt, he expects to be able to stabilize his customer base at 250 shirts per day How long would take to break even at the reduced price of So 997 Should David cut his price and buy the new press?

Sagot :

Yes, David must lower his pricing and get the new press because it has the quickest breakeven time in this construction.

Qa:

F = $15400 in fixed cost

V = $0.25 for variable costs

P=$1.1, the selling price.

Contribution margin (C) = P-V (1.1-0.25) = $0.85

F/C=15400/0.85 is the breakeven point.

= 18117.65

= 18118 tops

Qb:

Low demand prediction:

50 shirts per day/18118

= 362.36

~ 363 days

high estimate of demand of breakeven:

daily 18118/200 shirts

= 90.59

~ 91 days

Qc:

New contribution margin: 0.99 minus 0.25 equals $0.74

F/C=15400/0.74=20811 shirts as the new breakeven quantity.

250 shirts per day are the new estimates for demand.

Time to break even is equal to 20811/250.

= 83.24 days

Yes, David must lower his pricing and get the new press because it has the quickest breakeven time in this construction.

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