A small equipment rental facility has nine appliance dollies. There are 14 customers every day who...

A small equipment rental facility has nine appliance dollies. There are 14 customers every day who request this equipment. If the equipment is not available, they leave and go to a competing rental facility. Customers arrive evenly over a 12-hour period (6am to 6pm), 7 days per week. The average rental duration is 6 hours.

a. What is the likelihood that a customer going to the rental facility will find an appliance dolly available?

b. Assume each 6-hour rental is $10. How much revenue does the store make per week from the dollies?

c. Assume that a promotional campaign gives gift card worth $5 if the dolly is unavailable. What is the total gift card value that the store will have to issue on average per week?

d. What would be the payback time (not considering interest rates) in days for purchasing an additional dolly at $200?

Expert Solution

Answer a)

Total customer entertainer per day will be = (12hour x 9 dollies )/2 = 54 hour per day rented

Customer required in hours= 84 (14x6)

Likelihood of customers getting appliance dolly is = 54/84*100 = 64.29%

Answer b)

Revenue per week = 54 hour * 10 * 7 days a week = $ 3780/ week of 7 days

Answer c)

Value of total gift card per week (if customer return without rental ) = 14 customers per day x 64.29% x 5 gift x 7 days a week = $315 per week of 7 days

Answer d)

Revenue earned from per customer = 1 dolly*2 shift*10 = $20

Payback period = $200/20 = 10 days if 1 dolly purchase and rent.

Note : All parts answer provided. Positive feedback will be highly appreciated.

ekkarill92 answered 2 years ago

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