# The Clean Laundry Corner Case Study

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The Clean Clothes Laundry Corner Shawn Morris MG585 - Managerial Decisions September 20, 2013 Dr. John Theodore The Clean Clothes Laundry Corner (A) What is Molly’s current monthly volume? Molly’s fixed costs are \$1,700 per month, and her variable costs are \$0.25 per item, in which Molly is charging \$1.10 per clothing item. Molly’s current monthly volume is 2,000 items. The answer was derived by using the following equation: \$1,700 ÷ (1.1 – \$0.25) = 2000 (B) If Molly purchases the new equipment, how many additional items will she have to dry-clean each month to break even? Using information given in question C, the \$16,200 in new machinery will be divided up over 36 months. This additional cost will add \$450 per month to Molly’s fixed costs, bringing her total to \$2,150 monthly. With that given information, Molly would need to clean an additional 529 items a month to break even. The answer was derived by using the following equation: \$2,150 ÷ (1.1 – \$0.25) – 2000 = 529.412…show more content…
What monthly profit would she realize with that level of business during the next 3 years? After 3 years? Molly’s costs do not change in the next 3 years, she can expect to see a monthly profit of \$1,505 for the next three years. The answer was derived by using the following equation: 4,300 × (1.1 – \$0.25) - \$2,150 = \$1,505. Once the new machinery is paid in full and Molly’s fixed costs return to \$1,700 per month, her new monthly profit after 3 years will be \$1,955. The answer was derived by using the following equation: 4,300 × (1.1 – \$0.25) –1700 =