Dirt Devils is a partnership that specializes in office cleaning. The charge per office averages $175 per visit. The variable costs per visit are $65. The fixed operating costs are $90,000. The management of Dirt Devils wants to maintain a profit of 10 percent of total sales revenue. (Hint: Define the desired profit as a percentage of sales rather than a dollar amount.)
Required:
A. What is the profit equation?
B. How many offices must be cleaned to achieve the profit goal?
C. If the price charged for office cleaning is increased by 20 percent, how many offices must be cleaned to achieve the profit goal?
D. What are the problems that might be encountered by changing the price charged for office cleaning? Why?