Managerial Accounting: P7-19 John Chang is president of Cleaning Machines

Managerial Accounting

P7-19 using variable costing to make business decisions
John Chang is president of Cleaning Machines, a new car washing service that makes house calls. John has decided that his goal for the coming year is to earn a profit of $40,000. Clean machines reported the following sales and cost information for the year just ended:
per 500 cash washes
Sales revenue 60,000 120
Less all variable costs 20,000 40
Less all fixed costs 40,000 80
net income -

Clean machines performed 500 car washes during the year.

A. How many car washes will clean machine need to do in order to earn John's target profit of $40,000?
B. If John thinks that that number of car washes is an unrealistic high goal, what else could he do to achieve his target profit. (couldn't he add detailing the cars after washing to help achieve his target profit.)
C. John is considering raising the price of a car wash to $130. However, he anticipates that if he raises the price, demand will fall and he will perform 450 car washes. What will his net income be if this occurs? What do you think John should do?
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