Question: Suppose you were considering going into the car wash business an

Suppose you were considering going into the car-wash business and investing in a new kind of car-washing unit which is more mechanized than the usual ones—but also has higher fixed costs. Calculate the break-even point in dollars and units if the usual price of $4 per car were charged. The variable cost per car is estimated at $2. The total fixed cost per year (including depreciation, interest, taxes, fixed labor costs, and other fixed costs) is estimated at $320,000.00
a. Break-even Point in $
b. Break-even Point in units
c. Calculate the break-even points (in $ and units) if the retail price of car wash drops to $3.50 per car due to competition in the future.
d. Break-even point in $
e. Break-even point in units
f. Should you go into the car-wash business in any of the above situations? Explain.

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  • CreatedSeptember 19, 2013
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