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Price-Per-Pound Report for Investors: Washing Machine

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Email From Fred and Carrie
Date: December 1
Subject: Price-Per-Pound Report for Investors

Hi,
Thanks for helping us examine the price-per-pound model. The Report you create will help us learn more about the potential profit and allow us to make decisions that will be best for our business.

1. We need you to start by researching washing machines. Choose one that you think will be economical and practical for a price-per-pound model. Make sure you provide a link to the website where we can purchase the washer you choose. Also include the washing machine's capacity in pounds. Use the following information to convert capacity from cubic feet to pounds of laundry:
Less than 4.0 cubic feet=16 pounds of laundry ★ 4.1-4.5 cubic feet=20 pounds of laundry
4.6 cubic feet or more=28 pounds of laundry

2. Determine a reasonable cost per load for the chosen machine. This will represent the amount each load of laundry will cost us to wash. Follow these steps to find the cost per load:
1. Consult the machine's Energy Guide, which is usually located on the webpage where your machine can be purchased from. The Energy Guide will contain the cost of the product's energy per year, as well as the average loads per week. Use this information to help you find the cost of energy per load.
2. Add $0.10 per load for the cost of water.
3. Add $0.15 per load for the cost of detergent.
4. Add $0.50 per load for the cost of employee labor.
Keep in mind that, due to the nature of the laundry business, the cost per load will remain constant despite the weight of the laundry. In other words, partial loads will cost us the same as full loads.
In the report, include the cost per load, as well as an explanation of how you determined it.

3. Determine a formula for profit. This formula should show the profit for any given amount of laundry (in pounds), and take the expense per load into account. Remember, we will charge the customer $1.00 for every pound.

4. Provide a table representing a range of solutions from 0 pounds to 60 pounds, including solutions for 20, 40 and 60 pounds. Use any reasonable increment (for example, every five or ten pounds.) Include the following columns in your table:
Weight of Laundry (in lbs)
Machines Needed (M)
Sales (s)
Cost per load (c)
Profit (P) ΔP

5. Include a piecewise function graph showing profit per pound of laundry, with reasonable increments. Make sure we can clearly see the "pieces" of the graph!

6. At the end of the report, explain (in two-three paragraphs) what the formula, table and graph each show, as well as what each means for our business.

7. Finally, compare the two models (price-per-pound and price-per-load) and explain which one you think we should use. We are interested in whichever model has the potential to be more profitable. Be sure to apply your answer to our business.

Thank you again for all your help on this! Fred and Carrie

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Solution Summary

The Word file is over 800 words long and contains information about a washing machine, its energy guide, computations, tables and graphs. Explanations are provided for each step.

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Price-Per-Pound Report for Investors

1
The washing machine LG model WT7200CW, which can wash 5.0 cubic feet, was used for this report. Since the washing machine can wash 4.6 cubic feet or more of laundry, a 28-pound capacity of laundry per load was used (this information was obtained from the email from Fred and Carrie). You can take a look at the machine using the following link: https://www.bestbuy.com/site/lg-5-0-cu-ft-8-cycle-top-loading-washer-white/5712142.p?skuId=5712142.

2
The washing machine's energy guide is shown below.

According to the washing machine's Energy Guide, this machine will cost $16 per year when used with an electric water heater, or $10 per year when used with a gas water heater. The $16 per year amount for electricity will be used in the following calculations. The energy guide based these figures on completing 6 loads of laundry per week, so this value is used when calculating the electricity costs.

Number of weeks per year = 52
Electricity cost per load = $16/52/6 = $0.051
 
The costs per load for water, detergent and labor were obtained from the email from Fred and Carrie. The costs per load are listed ...

Solution provided by:
J Pye, MSc
Education
  • MSc, California State Polytechnic University, Pomona
  • MBA, University of California, Riverside
  • BSc, California State Polytechnic University, Pomona
  • BSc, California State Polytechnic University, Pomona
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