A lube shop operates a chain of shops that offer 20 minute oil change and lubric

Question

A lube shop operates a chain of shops that offer 20 minute oil change and lubrication service for passenger cars and light trucks. The shops have an overhead of $1,000 per day. Labor and materials cost $5 dollars per job, and the customers are charged $19.95 dollars for the service. Determine:

a. The number of jobs per day that a shop needs in order to cover all of its costs.

b. The profit or loss that would result if 35 cars were serviced in a day.

c. Suppose two workers work together in a shop and each receives $20 dollar in pay and benefits plus $ 1 dollar per job, customers are still charged $19.95, and materials cost $3 dollars per job. What is the break even volume for the shop? (The $20 per day for the employees is a fixed cost)

Explanation / Answer

a) The shop makes 19.95 on each job, but it costs them 5 per job, so overall they make: (19.95-5) = 14.95 per job. They spend 1000 each day no matter what. To cover all costs, we need: 14.95x = 1000 Solving for x, we get: 66.889 so the shop needs 67 jobs per day to cover all its costs. b) For 35 cars, they make: (35)*(14.95) = 523.25 However, they spend 1000 no matter what so they end up losing: 523.25-1000 = 476.75 lost c) The customers are still charged 19.95, but materials costs $3 and two of the workers get $1 per job, so the profit per job is the same as before, 14.95. However, on top of 1000, the workers each get 20, so the overall cost is 1040. Thus, we now have: 14.95y = 1040 Solving for y, we get: y = 69.57 Thus, 70 jobs are needed to break even.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.