Answer to Question #257247 in Economics of Enterprise for moatasem

Question

Claudia has sold her car and received approval from the garage owner to re-lease her downtown reserved parking spot for the next four months so she can make some extra money. The rental fee is $200 per month, and she expects to charge $18 per day. Transportation in a car pool will cost her $6 per day. If there are a maximum of 20 work days per month for re-leasing the spot, determine the following: a. Total cost and revenue relations b. Breakeven quantity per month c. Amount of money she will make (or lose) if the number of re-leased days per month over the four-month period are 18, 12, 17, and 20.

Answer 1

(a)

Total cost=rental fee+ transportation fee.

In a month:

$=200+(6\times20)=320.$

In 4 months:

$=320\times4$

=$1280

Total revenue in a month: $=18\times20=360.$

In 4 months:

$360\times4=1440$

=$1440.

(b)

Break even quantity per month:

$=\frac{Fixed Cost}{P-VC}$

$=\frac{200}{(18\times20)-(6\times20)}$

$=0.8$

(c)

Profit for 18 days:

Total cost =$200+(6\times18)=308.$

Total revenue$=18\times18=324$

Profit $=324-308=16$

For 12 days:

Total cost$=200+(6\times12)=272$

Total revenue$=18\times12=216$

Here, a loss of $56 is made.

For 17 days:

Total cost $=200+(6\times17)=302$

Total revenue$=18\times17=306.$

Profit $=306-302=4$

For 20 days:

Total cost $=200+(6\times20)=320.$

Total revenue$=18\times20=360.$

Profit $=360-320=40$

=$40.