Ugly quack car rental rents cars at laguardia airport. The car rental market consists of two segments; short term segment, which rents for an average of 0.5 week, and the medium-term segment, which rents for 2 weeks. Ugly Quack currently rents an average of 200 cars a week to the short-term segment and 100 cars a week to the medium-term segment.
Approximately 20 percent of the cars returned (evenly distributed across both segments) are found to be defective and in need of repairs before they can be made available for rent again. The remaining cars not needing repairs are cleaned, filled with gas, and made available for rent. On average, there are 100 cars waiting to be needing repairs spend an average of 2 weeks in the repair shop and incur an average of cost of $150 per car. Assume cars are rented as soon as they are available for rent; that is, as soon as they have been cleaned or repaired.
Short-term renters pay $200 per week, while medium-term renters pay 120$ per week. The Flow of the car is shown below.
Identify throughout, inventory, and flow time at stage.
What profit does Ugly Quack earn Per week with the current system? Assume each car loses $40 in value per week because of depreciation.