Problem:

Cheapest Car Rental rents cars at the chicago airport. The car rental market consists of two segements: the short term segement, which rents for an average of .5 weeks, and the medium term segment, which rents for an average of 2 weeks. Cheapest 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% 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 200 cars waiting to be cleaned. The average cost of this operation is $5 per car. Cars needing repairs spend an average of 2 weeks in the repair shop and incur an average cost of $150 per car. Assume that 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.

Required:

Question 1) Indentify throughput, inventory and flow time at each stage?

Question 2) What profit does Cheapest earn per week with the current system?

Question 3) Assume that each car loses $40 in value per week because of depreciation?

Solve the given numerical problem and illustrate step by step calculation