Question
You are the owner of a specialty car company that buys standard cars, dresses them up with a new paint job, custom parts, high end
You are the owner of a specialty car company that buys standard cars, dresses them up with a new paint job, custom parts, high end audio components and other accessories, and resells the upgraded cars. You havebeen operating for two years and have a good reputation, but you do not think you are as successful as you should be and have decided to get more business-like in your approach.
As you look through your accounts you realize things do not quite add up. Up to now, you have been selling your redesigned cars for an average of $45,000 apiece. This seemed like a reasonable price but now youare not so sure.
You sold 98 cars last year and incurred the following expenses:
Rent is $12,500 per month
You pay each of your six employees $5,000 per month.
Utilities such as electricity and heating cost $1,000 per month
Marketing and promotion costs including visits to trade shows were $28,000 for the year
On average you buy the car for $25,000 apiece and then add about $15,000 worth of paint, custom parts, audio components and accessories to each one.
Looking at your current revenues and expenses, are you currently making a profit? How much money are you currently making or losing in a year? At your current sale price, how many cars do you have to sell tohit your break-even point?
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