Problem 8-2 A The owner of Genuine Subs, Inc., hopes to expand the present opera
ID: 390173 • Letter: P
Question
Problem 8-2 A The owner of Genuine Subs, Inc., hopes to expand the present operation by adding one new outlet. She has studied three locations. Each would have the same labor and materials costs (food, serving containers, napkins, etc.) of $1.60 per sandwich. Sandwiches sell for $2.40 each in all locations. Rent and equipment costs would be $5,250 per month for location A, $5,625 per month for location B, and $5,875 per month for location C. a. Determine the volume necessary at each location to realize a monthly profit of $9,250. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Location Monthly Volume A B C b-1. If expected sales at A, B, and C are 20,250 per month, 22,250 per month, and 23,250 per month, respectively, calculate the profit of the each locations? (Omit the "$" sign in your response.) Location Monthly Profits A $ B $ C $ b-2. Which location would yield the greatest profits? • Location B • Location A • Location C
Problem 8-2 B Location Score Factor (100 points each) Weight A B C Convenience .15 89 79 65 Parking facilities .20 79 79 95 Display area .18 88 92 90 Shopper traffic .27 87 90 89 Operating costs .10 92 88 90 Neighborhood .10 92 88 80 1.00 a. Using the above factor ratings, calculate the composite score for each location. (Do not round intermediate calculations. Round your final answers to 2 decimal places.) Location Composite Score A B C b. Determine which location alternative (A, B, or C) should be chosen on the basis of maximum composite score. • B • A • C
Explanation / Answer
Problem 8-2 A
a. Determine the volume necessary at each location to realize a monthly profit of $9,250
For A: Suppose X be the volume
9250 = 2.40 X - 1.60 X + 5250
9250=0.8X+5250= 0.8X=4000= X=4000/0.8=5000
A: 5000
For B:
9250 = 2.40 X - 1.60 X + 5625
9250=0.8X+5625= 0.8X=3625 = X= 4531.25 == 4531
B: 4531
Similarly for C:
9250=0.8X+5875= 0.8X=3375= X=4218.75==4219
C: 4219
b-1. If expected sales at A, B, and C are 20,250 per month, 22,250 per month, and 23,250 per month, respectively, calculate the profit of the each locations?
A. [(2.40-1.60)*20,250]-5250= $10,950
B.[(2.40-1.60)*22,250-]5625=$12,175
C. [(2.40-1.60)*23,250]-5875=$12,725
b-2. Which location would yield the greatest profits?
Location C yields the highest profit
Problem 8-2 B
Composite Score = product of weightage given per factor + score per factor
The total sum of weight = 1.53
a. Composite score A= 13.35+15.8+15.84+23.49+9.2+9.2= 86.88= 87
Composite score B= 11.85+15.8+16.56+24.3+8.8+8.8=86.11
Composite score C=9.75+19+16.2+24.03+9+8=85.98= 86
b. On the basis of composite scores, we can see that A is the best
Weight A B C Convenience .15 89*.15=13.35 79*15=11.85 65*.15=9.75 Parking facilities .20 79*20=15.8 79*20=15.8 95*20=19 Display Area .18 88*.18=15.84 92*.18=16.56 90*.18=16.2 Shopper Traffic .27 87*.27=23.49 90*.27=24.3 89*.27=24.03 Operating Cost .10 92*.10=9.2 88*.10=8.8 90*.10=9 Neighbourhood .10 92*.10=9.2 88*.10=8.8 80*.10=8