David Austin recently purchased a chain of dry cleaners in northern Wisconsin. Although the business is making a 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). David estimates that with the new press, it will cost $0.25 to launder and press each shirt. Customers are charged $1.10 per shirt. a. How many shirts will David have to press to break even? b If David 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? Should David cut his price and buy the new press?
David Austin recently purchased a chain of dry cleaners in northern Wisconsin. Although the
business is making a 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). David estimates that with the new press, it will cost $0.25 to launder and press each shirt.
Customers are charged $1.10 per shirt.
a. How many shirts will David have to press to break even?
b If David 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? Should
David cut his price and buy the new press?
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