Kim Epson operates a full-service car wash, which operates from 8 A.M. to 8 P. M. 7 days a week. The car wash has two stations: an automatic washing and drying station and a manual interior cleaning station. The automatic washing and drying station can handle 30 cars per hour. The interior cleaning station can handle 200 cars per day. Based on a recent year-end review of operations, Kim estimates that future demand for the interior cleaning station for the 7 days of the week, expressed in average number of cars per day, would be as follows:

By installing additional equipment (at a cost of $50,000), Kim can increase the capacity of the interior cleaning station to 300 cars per day. Each car wash generates a pretax contribution of $4.00. Should Kim install the additional equipment if she expects a pretax payback period of 3 years orless?

  • CreatedNovember 07, 2013
  • Files Included
Post your question