Joe "Mr Clean" Smith Is Planning to Start a New Service

question 41

Multiple Choice

Joe "Mr. Clean" Smith is planning to start a new service for his car wash company. Previously, everyone who wanted his or her car washed had to come to Joe's business, Mr. Clean Car Wash. He and his staff have decided that there is a substantial market for people who would want to have their car washed at their home. After considerable market research the following daily demand equations have been determined.
Car washes done at Mr. Clean:
Q_c = 550 - 25P_c, so that MR_c = 22 -.08Q_c
Car washes done at home:
Q_h = 95 - 2.5P_h, so that MR_h = 38 - .8Q_h,
Q_c = the number of car washes per day done at Mr. Clean
Q_h = the number of cars washes done at people's homes.
MC = $6.00 for both in-house and at-home car washes and is constant
How many car washes must be sold at Mr. Clean and at-home in order to maximize profit?

• A) Mr. Clean = 100, At Home = 20
• B) Mr. Clean = 100, At Home = 40
• C) Mr. Clean = 200, At Home = 20
• D) Mr. Clean = 200, At Home = 40
• E) Mr. Clean = 300, At Home = 60

Comprehend the rationale behind using historical cost for asset valuation in financial statements.

Recognize the conditions under which the going concern assumption may not be appropriate.

Understand the concept and importance of predictive value in accounting information.

Identify and understand the constraints in accounting, such as cost and materiality.

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