CASE 1: INTRODUCTION TO

MANAGEMENT SCIENCE
BY: ALFANTA, AUXTERO, SERVANO
CASE PROBLEM 1: THE CLEAN
CLOTHES CORNER LAUNDRY

New machine $16,200

Estimated variable cost $0.25
Current fixed cost $1,700
Price per item $1.10
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MODEL SOLUTION (CONT.)

)
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new break-even volume

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CASE PROBLEM 2:THE OCOBEE RIVER
RAFTING COMPANY
RAFTS FOR
SALE
MODEL SOLUTION

alternative 2 profit
CASE PROBLEM 3:CONSTRUCTING A
DOWNTOWN PARKING LOT IN DRAPER
MODEL SOLUTION
CASE 4: A BUS SERVICE FOR DRAPER
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The town anticipates that the service will lose money the first year; how much will it
lose?
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How many years will it take the service to break-even, if at all, during the 6-year
life span of the buses?
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What would be the effect if the bus service ridership averages 45 passengers per trip? 50 passengers
per trip?
“Bus service ridership 45 passengers per trip”
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What would be the effect if the bus service ridership averages 45 passengers per
trip? 50 passengers per trip?
“Bus service ridership 50 passengers per trip”
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If the trips per day were reduced to 3 with a corresponding increase in passengers
to 50 (due to increased demand for the fewer trips), what effect would this have?
“Bus service ridership 50 passengers per trip with 3 trips a day”
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Because the bus service project has a “green” footprint by taking cars off of the road, and will also spur economic
development by providing low-cost regular transportation from Draper to Roanoke, and from Roanoke to the
university, the town believes it can get a federal grant to pay for the purchase of the buses. How would this effect
the financial loss in the first year of operation, and the years it might take to break even?

The town will no longer pay for the purchase of 3 buses If the town is able to get the federal grant to
pay for the purchase of the buses.

Since the town will no longer pay for the 3 buses, they will only pay for the operating cost of 3 buses
for 365 days which costs $591,300.