MINI CASE 2 Instruction: Read the case narrative provided below. Then, using Microsoft Excel, complete the two tasks circled in red at the bottom of this page.

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 I 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.): $1.50/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 youd 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