448 Words2 Pages

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 =

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 =

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