Gas Me Up is considering offering bagged ice sales through a self-service company that would locate a machine on the edge of the parking lot. IceBox would charge a monthly lease fee of $325 for setup and maintenance and there is a utilities’ cost Gas Me Up incurs of $0.07 for every bag of ice. KeepItCool would charge a monthly lease of only $225, but the added energy cost for every bag of ice is $0.11 due to the larger size of the machine. Customers purchase each bag of ice for $2.50, regardless of the company, but Gas Me Up only earns 40% of the total revenue for each bag of ice sold. What is the annual break-even point for each option? At what volume in number of bags of ice would the two options have the same cost? At what forecasted volume should Gas Me Up select IceBox and what volume should the company select KeepItCool and why?
Gas Me Up is considering offering bagged ice sales through a self-service company that would locate a machine on the edge of the parking lot. IceBox would charge a monthly lease fee of $325 for setup and maintenance and there is a utilities’ cost Gas Me Up incurs of $0.07 for every bag of ice. KeepItCool would charge a monthly lease of only $225, but the added energy cost for every bag of ice is $0.11 due to the larger size of the machine. Customers purchase each bag of ice for $2.50, regardless of the company, but Gas Me Up only earns 40% of the total revenue for each bag of ice sold. What is the annual break-even point for each option? At what volume in number of bags of ice would the two options have the same cost? At what forecasted volume should Gas Me Up select IceBox and what volume should the company select KeepItCool and why?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
Related questions
Question
100%
Gas Me Up is considering offering bagged ice sales through a self-service company that would locate a machine on the edge of the parking lot. IceBox would charge a monthly lease fee of $325 for setup and maintenance and there is a utilities’ cost Gas Me Up incurs of $0.07 for every bag of ice. KeepItCool would charge a monthly lease of only $225, but the added energy cost for every bag of ice is $0.11 due to the larger size of the machine. Customers purchase each bag of ice for $2.50, regardless of the company, but Gas Me Up only earns 40% of the total revenue for each bag of ice sold.
- What is the annual break-even point for each option?
- At what volume in number of bags of ice would the two options have the same cost?
- At what
forecasted volume should Gas Me Up select IceBox and what volume should the company select KeepItCool and why?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 5 images
Recommended textbooks for you
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Practical Management Science
Operations Management
ISBN:
9781337406659
Author:
WINSTON, Wayne L.
Publisher:
Cengage,
Operations Management
Operations Management
ISBN:
9781259667473
Author:
William J Stevenson
Publisher:
McGraw-Hill Education
Operations and Supply Chain Management (Mcgraw-hi…
Operations Management
ISBN:
9781259666100
Author:
F. Robert Jacobs, Richard B Chase
Publisher:
McGraw-Hill Education
Purchasing and Supply Chain Management
Operations Management
ISBN:
9781285869681
Author:
Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:
Cengage Learning
Production and Operations Analysis, Seventh Editi…
Operations Management
ISBN:
9781478623069
Author:
Steven Nahmias, Tava Lennon Olsen
Publisher:
Waveland Press, Inc.