Answered: Fully develop and describe at least two…

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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I apologize for a long post, but I had to ensure all the information is here. The scenario's primary question is at the very bottom:

You are an assistant manager at the Best Bean Coffee Shop. The manager liked the work you conducted for the purchase of the new coffee machine so much that you were selected, again, to conduct another analysis and provide your recommendation. Currently the coffee shop is fully staffed and open 6 days a week from 05:00 – 21:00 (Monday-Saturday), running three shifts as identified in the table.

Morning (05:00 – 11:00)	Afternoon (11:00 – 17:00)	Evening (17:00 – 21:00)
2 each Cashiers	2 each Cashiers	1 each Cashier
5 each Baristas	5 each Baristas	2 each Barista
1 each Assistant Manager	1 each Assistant Manager	1 each Assistant Manager

The following table provides the current Costs/Revenues for the coffee shop.

Cost/Revenues Table

Shift	Position	N0	Wage / Hr	Hrs / Shft	Days / Wk	Wages / Week	Average Sales / Day	Average Utilities / Day	Average Operating Cost / Day
Roaming	MGR	1	$27.00	8	5	$1,080.00
Morning	Cashier	2	$14.50	6	6	$1,044.00	$6,146.25	$22.00	$973.50
Morning	Barista	5	$15.00	6	6	$2,700.00
Morning	Asst MGR	1	$20.00	8	5	$800.00
Afternoon	Cashier	2	$14.50	6	6	$1,044.00	$4,023.00	$14.40	$637.20
Afternoon	Barista	5	$15.00	6	6	$2,700.00
Afternoon	Asst MGR	1	$20.00	8	5	$800.00
Evening	Cashier	1	$14.50	6	6	$522.00	$1,005.75	$3.60	$159.30
Evening	Barista	2	$15.00	6	6	$1,080.00
Evening	Asst MGR	1	$20.00	8	5	$800.00
	Totals	$11,490.00	$11,175.00	$40.00	$1,770.00

The manager wants to know if it is financially viable for the Best Bean Coffee Shop to open for the morning and afternoon shifts on Sundays. You run a three-month long test allowing you to collect information on the three Sundays, using volunteers from the current workforce. Since, from the Cost/Revenues Table, each cashier and barista works a 36-hour week, you paid them regular time for 4 hours and double time for 2 hours. The assistant managers already work 40-hour week and were paid an additional 16 hours for working on a Sunday. You were told by the manager that the overtime pay would only be authorized for the Sunday test runs.

Please note: The manager stated there would be no changes in current wage rates, nor would there be a reduction in the current numbers of employees.

The data from the test is in the following table:

Sunday Test Costs and Revenues

Shift	Position	NO	Wage / Hr	Hrs / Shft	Overtime	Wages / Day	Average Sales / Day	Average Utilities / Day	Average Operating Cost / Day
Morning	Cashier	2	$14.50	4	4	$464.00	$3,380.44	$22.00	$681.45
Morning	Barista	5	$15.00	4	4	$1,200.00
Afternoon	Cashier	2	$14.50	4	4	$464.00	$2,212.65	$14.40	$446.04
Afternoon	Barista	5	$15.00	4	4	$1,200.00
Both Shifts	Asst MGR	1	$20.00	12	12	$2,880.00
	Totals	$6,208.00	$5,593.09	$36.40	$1,127.49

Note: This table includes overtime, if the shop is opened on Sundays, overtime will not be authorized.

Determine if the revenue will cover all costs (wages, operating costs, utilities) for opening the store permanently on Sundays. In determining how to conduct this analysis, you determine that for the average sales per day during the regular workday was 750 orders (this included sales of coffee and other items for a total of $11,175). The mean number of orders per hour, per shift in the work regular workday can be determined by dividing 750 by the number of orders per shift, then by 6 hours per shift. Then, using the Sunday means for each shift (and the Poisson Distribution), you would like to know the probability that the coffee shop could at least meet the per hour orders achieved during the regular work week. Using the following table, determine if the chances of meeting the regular work-week orders is possible, then determine based on projected revenues if the coffee shop can earn a profit by opening on Sundays. If so, determine and recommend alternatives to opening the shop on Sundays (overtime will not be allowed); answer the following questions.

Orders/Shift	Weekday Order/Hr	Sunday Order/Hr	Probability ≥ λ	Percent
Morning	413	69	38	~ 0.000002	0.0002%
Afternoon	270	45	25	~ 0.000094	0.0094%
Evening	67	11	NA	NA	NA
Total	750