QuestionQuestion

CAPACITY PLANNING
4. Sparkling Car Wash operates a full-service car wash, which operates from 8am to 8pm, 7 days a week. The car wash has 2 automatic stations: an automatic washing and drying station and a manual interior cleaning station. The automatic washing and drying station can handle 30 cars/hour. The interior cleaning station can handle 200 cars/day. Sparkling estimates that future demand for the interior cleaning station for the 7 days of the week (expressed in average number of cars per day is:
Day    M      T       W      Th      F    Sa    Su
Cars    160   180   150   140   280   300   250
By installing additional equipment (at a cost of $50,000), Sparkling can increase the capacity of the interior cleaning station to 300 cars/day. Each car wash generates a pretax contribution of $4.00. Should Sparkling install additional equipment if they expect a pretax payback period of 3 years or less?

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Total washes from the additional capacity:
(80 + 100 + 50) x 52
=11,960
Total pretax contribution from the additional washes...
$5.00 for this solution

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