Decision$-$Making Context: A friend is retiring from a lawn$-$mowing business and is asking if you would like to take over his business. He is not trying to make money on the sale of the business. Instead, he is concerned with $(1)$ taking care of his existing customers and $(2)$ having someone take over existing contracts on equipment he has purchased.

He currently mows $50$ lawns each week and charges $$50/$lawn$.$ He mows lawns himself and has two people working for him. He supplies all equipment:

Truck: He has one truck that he purchased. The amount he still owes on the truck is $$20,000,$ and the payment is $$300/$month$.$

Mowers: He has three new riding mowers. He owes $$3,000$ on each and he pays $$100/$month for each one.

Other Equipment: All other equipment is paid for and in good working order, and he is willing to sell all of it to you for $$2,000($and you think it will last $20$ mowing months$).$ He estimates it will cost $$100/$month for maintenance of the truck, mowers, and other equipment.

You have a degree in landscape architecture and design, and you have been the groundskeeper at a golf course for the last five years. You believe with your knowledge and entrepreneurial ideas you could improve greatly on his business model. In summary, your costs are

$$ Truck payment: $$300/$month

$$ Mowers: $$300/$month

$$ Other equipment: $$2,000$ to purchase now $($will last approximately $20$ months$)$

$$ Chief mower makes $$15/$hour; staff worker makes $$10/$hour$.$ Each staff worker can mow $1$ lawn$/$hour$.($Average $$13/$lawn in Scenario $1$ or average $$25$ per lawn in Scenario $2.)$

$$ Maintenance: $$100/$month

$$ Insurance: $$300/$month

$$ Fuel: $$3/$gallon; $1$ gallon is sufficient to mow one lawn.

$$ Supplies $($trimmer line, etc.$)$: $$1\mathrm{.}50/$lawn

$$ Advertising: $$50/$month$,$ but if you do $$300/$month advertising, you can potentially triple your volume of contracts.

$$ Owner $($you$)$ will spend time doing quality control, marketing, and planning for the future.

Required:

To run this business, you$$d have to leave your day job, where you earn $$4,000/$month$.$

$1.$ Assess whether this mowing business will be profitable if you mow $200$ lawns per month.

$2.$ Show a visualization of the change in monthly margin based on a range of labor costs per lawn.

Data: Lab $1\mathrm{.}1$ Data.xlsx

Specify the Question: What is the profit on each lawn if the mowing business mows $200$ lawns per month? What is the business$$s total profit per month?

Obtain the Data: Open Lab $1\mathrm{.}1$ Data.xlsx and browse its contents. The data will come from the various assumptions given.

Analyze the Data: Refer to lab $1\mathrm{.}1$ in your text for additional instructions and steps.

Answer the following questions based on the details computed.

Note: Round the margin and cost per lawn to $2$ decimal places.

Question Answer

$1.$ What is the total monthly margin for scenario $1?$

$2.$ In scenario $1,$ what is the expected number of lawns that will be mowed per month?

$3.$ What is the total margin per lawn for scenario $1?$

$4.$ What is the total monthly margin for scenario $2?$

$5.$ In scenario $1,$ what is the cost of the monthly truck payment per lawn?

Note: Submit your answers for the following Analysis Questions in the text entry field below.

$1.$ What is the reason for the difference between the margin per lawn in scenario $1$ and in scenario $2?$

$2.$ Why might some lawns require $$13/$lawn of labor while others require $$25/$lawn of labor? Do the two rates suggest a difference in quality?

$3.$ To run this business, you$$d have to leave a job where you earn $$4,000/$month$.$ Given the results of the analysis, what do you choose and why?