Fast as Lightning Is an Oil Change Service Drive-Through That

question 198

Essay

Fast as Lightning is an oil change service drive-through that charges each customer $24.00 for an oil and filter change service. Fast as Lightning has found that it costs its business $16.00 per oil and filter change. Monthly fixed costs are $44,000; current sales are 8,000 services.
a. Compute the breakeven sales in units.
b. Compute Fast as Lightning's margin of safety in units and sales dollars.
c. Compute Fast as Lightning's margin of safety as a percentage.
d. Compute Fast as Lightning's operating leverage factor.
e. Compute Fast as Lightning's % of operating income decline if sales fall by 18%.

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Definitions:

Effective Pricing

The strategy of setting a product's price based on the value perceived by the customer, market demand, and competition, aiming to maximize both profit and customer satisfaction.

Marketer

A person or company involved in the process of promoting, selling, and distributing products or services to potential customers.

Customer-Oriented

An approach by businesses that focuses on creating a positive experience for customers through tailored services and products that meet their needs.

Pricing Strategy

A method or model used by businesses to set the selling price for their products or services, taking into account factors like cost, competition, target market, and overall business objectives.