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The last question pleas James Waters owns Carzwash, a successful car wash and valet business located near a large shopping centre in Newtownabbey. He has
The last question pleas
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 average pound 30 per car for a wash and valet. This price attracts an average of 60 vehicles are pound 1200 per week. whilst the fixed costs are pound 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: (i) Reduce selling price: this option to him would mean reducing the price of each car wash and valet to pound 25: or, (ii) Aim for a weekly profit of pound 200. Explain what is meant by the terms variable cost', fixed cost', 'breakeven point' and margin of safety'. Calculated the number of cars that currently have to be washed/valeted each week in order to breakeven. Calculate the weekly profit that would accrue to James Waters, bases on washing 60 vehicles per week. Analyses the implications for Carzwash, of lowering the price of each wash and valet to pound 25 per vehicle Calculate the number of additional vehicles to be to be washed/valeted in order to achieve the desired weekly profit. Evaluate the usefulness of breakeven analysis to a business such as Carzwash Step by Step Solution
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