posted by Raj on .
Ram Dubey recently purchased a chain of dry cleaners in North Uttar Pradesh. Although the business is making a modest profit now, Ram 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. Ram estimates that with the new press, it will cost $ 0.25 to launder and press each shirt, customers are charged $ 1.10 per shirt. Q1) How many shirts will Ram have to press to break even?
Q2) So far Ram’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?
Q3) If Ram 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?
Q4) Should Ram cut his price and buy the new press?
Q1) break even over what time period? He'll never press enough shirts to pay it off in one day.
Q2) revenue must cover cost. So, if he presses x shirts,
1.10x = 15400 + .25x
x = 18,118
So, if he presses 50 shirts/day, it will take 362 days.
Less if he can press more.
Q3) refigure the number of shirts, and hence the time period.