Eric wants to start a car detailing business but is unsure how many cars he will need to detail before making a profit. His cousin has offered to let him use a small section of his shop for only $400 per month. Eric is going to pay his friend $10/hour to help him. He has estimated his additional expenses to be the following:
His share of monthly utilities $110
Wax (will yield 10 cars) $16.00
Towels, soap, and other supplies $2.75/vehicle
Leasing of equipment $100/month
Marketing $125/month budgeted
He estimates that it will take him 4 hours to detail a vehicle if he has help from his friend.
He plans to charge $90 per vehicle.
How many vehicles does Eric need to detail each month to breakeven?
Eric is now considering leaving his full-time job to grow his car detailing business but does not want to lose his salary. If he decides to pay himself $2000 per month how many cars does he have to detail in a month now to breakeven?
Are these numbers attainable? Please explain. List two suggestions you could give Eric that would affect his breakeven point: