accounting-Assume that you are Janice Wilton and you have been asked to elaborate
that you are Janice Wilton and you have been asked to elaborate on the memo in
Exhibit 1 to address the issues raised by Ted Radcliff in both of his
conversations with you. Use the report
formfrom the course website andplease be certain to address all of the
Q. 1. What
conditions would justify the assumption of a constant contribution margin per
customer? Do you think those conditions
are likely to hold here? To support your
conclusions, do a scatter plot of the sample data, and then use the sample data
to run a regression of purchase costs (dependent variable) on purchase revenues
(independent variable). [Hint: What is the meaning of the intercept term of
your regression results?]
Q. 2. Is
there good reason to believe that evening customers purchase, on average, more
than day customers? Support your answer
by performing a statistical test on the difference between the mean day
purchase and the mean evening purchase (using a two-tail test).
Q. 3. Is
Janice using marginal cost and marginal revenue correctly in her analysis? Explain the errors in her analysis, if
any. [Hint: Think about Ted Radcliffâs
Q. 4. What
closing time should 21st Century Liquors choose to maximize
profits? Calculate the increase in profits
(relative to the current closing time of 10pm) that would result from extending
store hours to 4am. If you recommend a
different closing time, calculate the increase in profits (again relative to
the current closing time) that would result from your recommendation.
Q. 5. a. Calculate the breakeven number of additional
customers for each added hour of operation
up to 4am.
b. Calculate the breakeven number of additional
customers for an entire year, assuming (i) a closing time of 4am and
then (ii) your recommended closing time, if it
differs from 4am.
the safety margin on new customers for the year. [Hint:
For the per-year analysis,
remember to account for the cost of the security upgrade. Use straight- line
depreciation as a measure of the fixed cost of the security upgrade, and then
the cost of overtime labor for the additional hours of business for each of the
360 business days in the
Q. 6. If
there are any additional issues you think are relevant to the choice of closing
time, be sure to mention them. Is there
anything missing from the analysis? Are
there any matters that require additional data collection or research?
contribution margin I calculated is 7.18 ( I use revenue minus cost, and then
find the average number, but Iâm not sure if its right).
the depreciation cost is 3000 per year. Other data is on the following pages.
you so much for helping!
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