Question

you run a nail salon. fixed monthly cost is $5,957.00 for rent and utilities, $5,875.00 is spent in salaries and $1,715.00 in insurance. also every customer requires approximately $2.00 in supplies. you charge $50.00 on average for each service. you are considering moving the salon to an upscale neighborhood where the rent and utilities will increase to $11,280.00, salaries to $6,611.00 and insurance to $2,171.00 per month. cost of supplies will increase to $6.00 per service. however you can now charge $146.00 per service. at what point will you be indifferent between your current location and the new location?

Answer 1

To find the point of indifference between the current and new location of the nail salon, we compare the profit earned at each location. We set the profit per customer at the current location equal to the profit per customer at the new location and solve for the point of indifference.

Step-by-step explanation:

To determine the point of indifference between the current and new location, we need to compare the profit earned at each location. At the current location, the total cost per customer is $5,957 + $5,875 + $1,715 + $2. The revenue per customer is $50. Therefore, the profit per customer is $50 - ($5,957 + $5,875 + $1,715 + $2).

At the new location, the total cost per customer is $11,280 + $6,611 + $2,171 + $6. The revenue per customer is $146. Therefore, the profit per customer is $146 - ($11,280 + $6,611 + $2,171 + $6).

To find the point of indifference, we set the profit per customer at the current location equal to the profit per customer at the new location:

$50 - ($5,957 + $5,875 + $1,715 + $2) = $146 - ($11,280 + $6,611 + $2,171 + $6)

Solving this equation will give us the point of indifference.