James Waters owns Carzwash, a successful car wash and valet business located near a large shopping Centre in Newtownabbey. He has built up a good reputation since opening the business three years ago, and many of his customers return on a regular basis. Carzwash offers a good quality service at a competitive price.

James charges 30 per car for a wash and valet. This price attracts an average of 60 vehicles per week. James estimates that he could wash and valet up to 100 cars per week, depending on weather conditions and parking spaces on the premises. The variable costs associated with washing/valeting 60 vehicles are 1200 per week, whilst the fixed costs are 400 per week at present.

James is satisfied with current customer numbers. However, a local newspaper has printed a story suggesting that a competitor intends to set up nearby, at a filling station. James is investigating two options in order to ensure the long term viability of the business:

Reduce Selling Price: this option open to him would mean reducing the price of each car wash and valet to 25; or,

Aim for a weekly profit of 200