Question

Ram Dubey recently purchased a chain of dry cleaners in North Uttar Pradesh. Although the business is making a modest profit now, Ram suspects that if he invests in a new press, he could recognize a substantial increase in profits. The new press costs $ 15,400 to purchase and install and can press 40 shirts an hour or 320 per day. Ram estimates that with the new press, it will cost $ 0.25 to launder and press each shirt, customers are charged $ 1.10 per shirt. Q1) How many shirts will Ram have to press to break even?
Q2) So far Ram’s workload has varied from 50 to 200 shirts a day. How long would it take to break even on the new press at the low demand estimate? At the high demand estimate?
Q3) If Ram cuts his price to $ 0.99 a shirt, he expects to be able to stabilize his customer base at 250 shirts per day. How long would it take to break even at the reduced price of $ 0.99?
Q4) Should Ram cut his price and buy the new press?

Answer 1

Q1) break even over what time period? He'll never press enough shirts to pay it off in one day.

Q2) revenue must cover cost. So, if he presses x shirts,

1.10x = 15400 + .25x
x = 18,118

So, if he presses 50 shirts/day, it will take 362 days.

Less if he can press more.

Q3) refigure the number of shirts, and hence the time period.