Question

A retired auto mechanic hopes to open a customizing shop for installing heated or ventilated seats. Two locations are being considered, one in the center of the city and one on the outskirts. The central city location would involve fixed monthly costs of $6,500 and labor, materials, and transportation costs of $20 per car. The outside location would have fixed monthly costs of $3,900 and labor, materials, and transportation costs of $30 per car. Dealer price at either location will be $80 per car. a. Which location will yield the greatest profit if monthly demand is (1) 150 cars

Answer 1

The outskirts location would yield the greatest profit of $3,600 when the monthly demand is 150 cars.

Step-by-step explanation:

To determine which location will yield the greatest profit when the monthly demand is 150 cars, we need to calculate the total costs and revenues for each location. For the central city location, the fixed monthly costs are $6,500 and the variable costs per car are $20. The revenue per car is $80. So, the total costs for 150 cars would be $6,500 + (150 * $20) = $9,500 and the total revenue would be 150 * $80 = $12,000. Therefore, the profit would be $12,000 - $9,500 = $2,500.

For the outskirts location, the fixed monthly costs are $3,900 and the variable costs per car are $30. The revenue per car is also $80. So, the total costs for 150 cars would be $3,900 + (150 * $30) = $8,400 and the total revenue would be 150 * $80 = $12,000. Therefore, the profit would be $12,000 - $8,400 = $3,600.

Based on the calculations, the outskirts location would yield the greatest profit of $3,600 when the monthly demand is 150 cars.

Answer 2

Outskrits

Step-by-step explanation:

The Cost of labor and materials is quite a bit less than if in the middle of town, in the big picture that 10 dollar difference in transportation is nothing in the long run. The only problem is as your not a big pass-by kinda place you might not get as many customers from it as you might like. Saving money is a key but a good product is the door to fortune.