Question

Jordan is developing a business plan for a residential building inspection service he wants to start up. Rent and utilities for an office would cost $1000 per month. The fixed costs for a vehicle would be $450 per month. He estimates that the variable office costs (word processing and supplies) will be $50 per inspection and variable vehicle costs will be $25 per inspection. Jordan would also spend $200 per month to lease a computer, and $350 per month for advertising. (USE GRAPHICAL METHOD)

a. If he charges $275 per inspection, how many inspections per month are required

before he can “pay himself?” (NEED DETAIL ANSWERS WITH WORKING)

b. How many inspections per month are required for Jordan to be able to draw a

salary of $4000 per month? ((NEED DETAIL ANSWERS WITH WORKING)

Answer 1

Fixed monthly cost

= Rent and utilities for an office +fixed costs for a vehicle + lease a computer+ advertising

= 1000 + 450 + 200 + 350

= $ 2000

Cost per inspection = word processing and supplies + variable vehicle cost

= 50+25

= $ 75

Thus, for x inspections in a month the total cost = 2000 + 75*x

a) If he charges $275 per inspection, how many inspections per month are required before he can “pay himself?

Thus, amount earned in x inspections should match amount spent

Thus, 275*x = 2000 + 75*x

Thus, 200*x = 2000

x = 10

Thus, 10 inspections are required per month before he can pay himself

b. How many inspections per month are required for Jordan to be able to draw a salary of $4000 per month?

- Now in order to draw $4000 per month,

amount earned - amount spent = 4000

Thus, 275*x - (2000+75*x) = 40000

Thus, 200*x = 6000

Thus, x =30

Thus, 30 inspections are required per month for Jordan so that he is able to draw a salary of $4000 per month