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    CRU Computer Rental: Case Study

    Uploaded by

    Vijay Koushal
    CRU Computer Rental is analyzing ways to improve profitability of their short-term computer rentals. Currently, renting computers for 4 weeks results in losses. Three scenarios are presented where CRU targets different portions of the 4, 8, and 12-week rental markets. Scenario 2, with a mix of 40% 4-week, 40% 8-week, and 20% 12-week rentals, results in the highest profit of $27,362.84. To further improve profits, CRU should increase long-term rentals, reduce inventory, lower costs, and potentially pass on more costs to short-term customers.

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    CRU Computer Rental: Case Study

    Uploaded by

    Vijay Koushal
    163 views5 pages
    CRU Computer Rental is analyzing ways to improve profitability of their short-term computer rentals. Currently, renting computers for 4 weeks results in losses. Three scenarios are presented where CRU targets different portions of the 4, 8, and 12-week rental markets. Scenario 2, with a mix of 40% 4-week, 40% 8-week, and 20% 12-week rentals, results in the highest profit of $27,362.84. To further improve profits, CRU should increase long-term rentals, reduce inventory, lower costs, and potentially pass on more costs to short-term customers.

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    CRU Computer Rental is analyzing ways to improve profitability of their short-term computer rentals. Currently, renting computers for 4 weeks results in losses. Three scenarios are presented where CRU targets different portions of the 4, 8, and 12-week rental markets. Scenario 2, with a mix of 40% 4-week, 40% 8-week, and 20% 12-week rentals, results in the highest profit of $27,362.84. To further improve profits, CRU should increase long-term rentals, reduce inventory, lower costs, and potentially pass on more costs to short-term customers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    163 views5 pages

    CRU Computer Rental: Case Study

    Uploaded by

    Vijay Koushal
    CRU Computer Rental is analyzing ways to improve profitability of their short-term computer rentals. Currently, renting computers for 4 weeks results in losses. Three scenarios are presented where CRU targets different portions of the 4, 8, and 12-week rental markets. Scenario 2, with a mix of 40% 4-week, 40% 8-week, and 20% 12-week rentals, results in the highest profit of $27,362.84. To further improve profits, CRU should increase long-term rentals, reduce inventory, lower costs, and potentially pass on more costs to short-term customers.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    CRU Computer Rental

    CASE STUDY

    Group 15

    BISWAJIT NAIK EPGP-13A-031


    CHANDAN KUMAR ROY EPGP-13A-032
    MANOJKUMAR J EPGP-13A-066
    MURALI M EPGP-13A-072
    VIJAY KOUSHAL ATYAM EPGP-13A-122
    What should be the minimum rental rate to avoid losses for short
    term rentals

    Total units = 16967, On rent = 8000

    Utilisation = 47.2%

    Profitability:

    • Revenue : 4800 x 30 + 3200 x35= 2,56,000

    • Cost per week

    • Depreciation cost = 108763

    • Other Cost = 158382

    • Profit = 256000-108763-158382 = -11145

    • Minimum short term rental to avoid loss

    • 3200* x = 11145

    • X= 3.5

    • Min rental on short term = 38.5$

    The minimum rental of short term to avoid losses is 38.5$

    PAGE 1
    What Should Management do to Improve the Profitability?
    • The sales drive done for Short term rental (4 Weeks) in 1997 has resulted in loss as the
    revenue cycle is very minimal when compared to cost incurring cycle, the discount provided
    for weekly rental added heap of loss to the company.
    • When compared with the rental period offerings that CRU has, we could infer from the
    below that net revenue generated is highest for the 12-week rental followed by 8-Week and
    then 4-week rental.

    Fixed cost/unit ( USD) Income (USD)


    No of Weeks Rented
    Shipping Receving Re-config Repair cost Depriciation Rent / Week Revenue / 1 Cycle Profit / 1 Cycle
    4 25 25 4 60.75 27.78 40 160 17.47
    4 ( Sales Drive) 25 25 4 60.75 27.78 35 140 -2.53
    8 25 25 4 60.75 55.56 30 240 69.69
    12 25 25 4 60.75 83.33 25 300 101.92

    • With inference from above CRU Rentals should target to increase their 8 weeks & 12-week
    rental customer base as it creates more revenue than the 4 Week cycle which is reflected
    from the sales drive done for 4-week cycle where loss is incurred.
    • CRU Should aim for increasing their revenue cycle and reduce the cost cycle to increase
    profit for the company.

    Below are few scenarios that we have considered based on the demand of market (Exhibit 2
    of Case Study) to improve profitability of Company:

    In the below Scenarios we have considered:

    1) Net Profit = Revenue – Cost Incurred

    2)Maintain a 2-week buffer of status 20 machines

    3) Revenue = Rental per week * No of Machines [ $ 40 for 4 Week , $30 for 8 Week , $ 25 for
    12 week]

    4) Cost Incurred = Depreciation + Shipping + Receiving + Repair + Re-Config

    PAGE 2
    Scenario 1:

    In this scenario we have considered that CRU targets to capture of 60 % 4-Week Market, 30%
    of 8-Week Market & 10 % of 12-Week Market.

    Net Profit:

    Scenario 1
    Revenue (USD) Depreciation (USD) Other Cost (USD) Profit (USD)
    248000 94755 142498.8 10746.2

    Scenario 2:

    In this scenario we have considered that CRU targets to capture of 40% 4-Week Market, 40%
    of 8-Week Market & 20 % of 12-Week Market.

    Net Profit:

    Scenario 2
    Revenue Dep Cost Profit
    245142.8571 91074.41026 126705.6 27362.84

    Scenario 3:

    PAGE 3
    In this scenario we have considered that CRU targets to capture of 20% 4-Week Market, 50%
    of 8-Week Market & 20 % of 12-Week Market.

    Net Profit:

    Scenario 3
    Revenue Dep Cost Profit
    226578.9474 83849.56731 107511 35218.38

    Inference:

    ➢ In the above three scenarios we can note that as the number of rentals increase for 12-week
    and 8- Week period the net profit, utilization is increasing.
    ➢ In addition to that the number of computers owned by CRU rental is reduced with increase
    in long term rental sales.

    Suggestions:

    ➢ Increase a greater number of contracts with corporate accounts and consulting firms to
    increase in productivity.
    ➢ Reduce the number of inventory machines.
    ➢ Increase the revenue cycle when compared to cost cycle.
    ➢ Add shipping costs and repair costs to customers who are opting for short term rental
    options.

    PAGE 4

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