Pat Baldwin owns and operates Outstanding Quality Rentals (OQR). OQR offers kayak rentals and shuttle service on the Petaholee River. Customers can rent kayaks at one station and enter the river there. They can then exit at one of two designated locations to catch a shuttle to return them to their vehicles. Following are the costs involved in providing this service each year.$\begin{array}{ll}
&\text { Fixed costs } & \text { Variable costs } \
\text { Kayak maintenance }&\$ 3,600 & \$ 4.20\
\text { Licenses and permits } & 4,800 & 0.00 \
\text { Vehicle leases } & 8,400 & 0.00 \
\text { Station lease } & 10,800 & 0.00 \
\text { Advertising } & 9,400 & 0.70 \
\text { Operating costs } & 32,400 & 0.80
\end{array}$OQR began business three years ago with a $36,000 expenditure for a fleet of 50 kayaks. These are expected to last seven more years, at which time a new fleet will be purchased. Pat is satisfied with the steady average rentals per year of 9,900.
Required:
What price should Pat charge per rental for the business to make a thirty percent life cycle profit?

Question

Pat Baldwin owns and operates Outstanding Quality Rentals (OQR). OQR offers kayak rentals and shuttle service on the Petaholee River. Customers can rent kayaks at one station and enter the river there. They can then exit at one of two designated locations to catch a shuttle to return them to their vehicles. Following are the costs involved in providing this service each year.$\begin{array}{ll}
&\text { Fixed costs } & \text { Variable costs } \
\text { Kayak maintenance }&\$ 3,600 & \$  4.20\
\text { Licenses and permits } & 4,800 & 0.00 \
\text { Vehicle leases } & 8,400 & 0.00 \
\text { Station lease } & 10,800 & 0.00 \
\text { Advertising } & 9,400 & 0.70 \
\text { Operating costs } & 32,400 & 0.80
\end{array}$OQR began business three years ago with a $36,000 expenditure for a fleet of 50 kayaks. These are expected to last seven more years, at which time a new fleet will be purchased. Pat is satisfied with the steady average rentals per year of 9,900.
Required:
What price should Pat charge per rental for the business to make a thirty percent life cycle profit?

Quizplus · Accepted Answer

The Answer of Pat Baldwin owns and operates Outstanding Quality Rentals (OQR). OQR offers kayak rentals and shuttle service on the Petaholee River. Customers can rent kayaks at one station and enter the river there. They can then exit at one of two designated locations to catch a shuttle to return them to their vehicles. Following are the costs involved in providing this service each year.$\begin{array}{ll}
&\text { Fixed costs } & \text { Variable costs } \
\text { Kayak maintenance }&\$ 3,600 & \$  4.20\
\text { Licenses and permits } & 4,800 & 0.00 \
\text { Vehicle leases } & 8,400 & 0.00 \
\text { Station lease } & 10,800 & 0.00 \
\text { Advertising } & 9,400 & 0.70 \
\text { Operating costs } & 32,400 & 0.80
\end{array}$OQR began business three years ago with a $36,000 expenditure for a fleet of 50 kayaks. These are expected to last seven more years, at which time a new fleet will be purchased. Pat is satisfied with the steady average rentals per year of 9,900.
Required:
What price should Pat charge per rental for the business to make a thirty percent life cycle profit?

Pat Baldwin Owns and Operates Outstanding Quality Rentals (OQR) OQR Began Business Three Years Ago with a $36,000 Expenditure