Chapter 22
Understanding Profit
Class Discussion Questions
Darin Jones and Linda Smith have decided to
increase the prices. Depreciation and rent are still $100,000.
Variable costs such as labor were expected to be $2.00 per vehicle washed. Price
was expected to average
$8.00 per vehicle, and they plan to wash 30,000 cars per year. 1. Calculate the
expected second-year profit
for Speedy Car Wash.
2. Graph the data in Question #1 using a scale in thousands.
3. Calculate the break-even point for the data in Question #1 using the concept of contribution to margin.
4. Redo Question #3 taking an algebraic approach.
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