CLEAN WASH LAUNDROMAT

By Mildred S. Melendres, former Asst. Professor at UP College of Business Administration

MS. Giesel Reyes, the proprietor of Clean Wash Laundromat (CWL), re-read the recently received fax
from Hair Cuts, a well-established chain of beauty parlors. Hair Cuts is proposing a business deal with
Ms. Reyes wherein Hair Cuts will avail of the wash, dry and fold service of CWL at 15% off the regular
price. The service will cover a period of four months from June to September, which are peak months
CWL and will entail 60 kg per week or 240 kg per month of laundry.

CWL was established two years ago with an initial investment of P800,000. Located near two prominent
universities and several residential condominiums, CWL caters mostly to students who live in
dormitories and to residents of condominiums. It offers three basic services: wash, dry and fold;
pressing and dry-cleaning. Except for dry cleaning services, all services are done in-house. Dry cleaning is
subcontracted to Dry Cleaning Experts (DCE) and is offered at a 15% mark-up.

CWL operates seven days a week from 7am to 9pm. It has 5 washing machines, 5 dryers, and 3 flat irons.
A washing machine and a dryer can handle a maximum of 15 loads of 3-kg laundry per day (1 load = 3
kg). CWL offers next day pick-up service. Upon the request of the customer, CWL can arrange a same
day pick-up or the customer can wait in the shop at no extra cost.

Requirements:

1. Should Ms. Reyes accept the proposal of Hair Cuts? What quantitative and qualitative factors
should Ms. Reyes consider?
2. Would your answer differ if the average number of loads per month for the period covered are
as follows:
June 2170
July 2190
August 2200
September 2180

Exhibit 1. Prices

Wash, dry, fold PhP 35/kg

Pressing:
Long sleeves PhP 20
Dress 45
Slacks 20
Dry cleaning:
Barong 75
Blazer 150
Dress 120
Blouse 90
Trousers 90
Skirts 60
Exhibit 2. Average number of loads per month (1 load=3kg)

January 1960
February 1820
March 1680
April 1680
May 1540
June 2080
July 2160
August 2170
September 2150
October 1960
November 2100
December 1960

Exhibit 3. Electric bills (in pesos)

January PhP 17,208

February 16,746
March 16,284
April 16,284
May 15,822
June 17,604
July 17,868
August 17,901
September 17,835
October 17,208
November 17,670
December 17,208

Exhibit 4. Other costs

Rent 30,000/month
Salary 1,060/day x 30 days =
31,800/month
Depreciation 4,166/month
(Washing machine and dryer costs on
average P50,000 each)
Telephone 1,400/month
Detergent Average of 76.8/load
Water Average of 0.50/load
LPG Average of 4.50/load
Leasehold improvement 100,000
signage 30,000
CWL leases its space from Space Realty for a period of 10 years. The signage has an estimated
useful life of 10 years.