BM2102
TASK PERFORMANCE ON MANAGEMENT SCIENCE
NAME: SHARRA MAE SANTIAGO SECTION: DATE: SCORE:
The Clean Clothes Corner Laundry
When Molly Lai purchased the Clean Clothes Corner Laundry, she thought that she would automatically generate good
business if she improved the laundry’s physical appearance because it was in a good location near several high-income
neighborhoods. Thus, she initially invested a lot of her cash reserves in remodeling the exterior and interior of the
laundry. However, she just about broke even in the year following her laundry acquisition, which she didn’t feel was a
sufficient return, given how hard she had worked. Molly didn’t realize that the dry-cleaning business is very competitive.
Success is based more on price and quality service, including quick service, than on the laundry’s appearance.
To improve her service, Molly is considering purchasing new dry-cleaning equipment, including a pressing machine that
could substantially increase the speed at which she can dry-clean clothes and improve their appearance. The new
machinery costs ₱16,200 installed and can clean 40 clothes items per hour (or 320 items per day). Molly estimates her
variable costs to be ₱0.25 per dry-cleaned item, which will not change if she purchases the new equipment. Her current
fixed costs are ₱1,700 per month. She charges customers ₱1.10 per clothing item.
Questions (7 items x 5 points):
1. What is Molly’s current monthly volume?
Molly's fixed costs = 1,700 per month
Variable costs are 0.25 per item
Cost per item is 1.10
Hence, the current monthly volume = 1,700 ÷ (1.1 - 0.25) = 2000
Molly's current monthly volume is 2,000 items.
2. If Molly purchases the new equipment, how many additional items will she have to dry-clean each month to break
even? Assuming that the new equipment would be paid in 36 months installment.
Molly is unhappy with the income from her current laundry business and she aims to increase her
profitability from the business. Molly has the opportunity to improve business efficiency by investing
16,200 units in new equipment. But the investment will increase the fixed cost from 1,700 to 2,150. As the
value increases, Molly has to clear more items to break even. If Molly buys equipment, she has to clear
over 2,529 items, which is 529 more than the existing 2,000 items to break. -even. The purchase of the
equipment will increase the efficiency of her business, which is very important, but at the same time she
needs to clear more than 2,529 pieces of equipment to make a profit. Buying equipment will require her to
clear more items to make a profit
3. Molly estimates that with the new equipment, she can increase her volume to 4,300 items per month. What
monthly profit would she realize with that level of business during the next three (3) years?
a. After three (3) years?
4. Molly believes that if she doesn’t buy the new equipment but lowers her price to ₱0.99 per item, she will increase
her business volume.
a. What will her new break-even be if she lowers her price?
b. What will her monthly profit be if her price reduction results in a monthly volume of 3,800 items?
5. Molly estimates that if she purchases the new equipment and lowers her price to ₱0.99 per item, her volume will
increase to about 4,700 units per month. Based on the local market, that is the largest volume she can realistically
expect. What should Molly do?
Rubric for grading computation:
CRITERIA POINTS
Complete solution with the correct answer 5
The last two major steps of the solution are incorrect 4
Half of the solution is correct 3
The first two major steps of the solution are correct 2
The first major step of the solution is correct 1
Rubric for grading:
CRITERIA PERFORMANCE INDICATORS POINTS
Provided pieces of evidence, supporting details, and factual
Content 3
scenarios
Expressed the points in clear and logical arrangement of ideas
Organization of Ideas 2
in the paragraph
TOTAL 5
REFERENCES
Taylor III, B. W. (2016). Introduction to Management Science (12th ed.). New York: Pearson Education Limited.
01 Task Performance 1 *Property of STI
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