Problem 8: The Owner Of Genuine Subs Inc. Hopes To Expand

Problem 8 2the Owner Of Genuine Subs Inc Hopes To Expand The Presen

The owner of Genuine Subs, Inc., aims to expand by adding a new outlet. She has evaluated three potential locations, each with identical labor and material costs of $1.80 per sandwich. Sandwiches are sold at $2.59 in all locations. The rent and equipment costs are $5,080 per month for location A, $5,600 per month for location B, and $5,780 per month for location C.

a. Determine the volume required at each location to achieve a monthly profit of $10,000. (Do not round intermediate steps; round final answers to the nearest whole number.)

b-1. If forecasted sales are 20,300, 22,900, and 23,400 sandwiches per month for locations A, B, and C respectively, calculate the monthly profit for each location. (Omit the "$" sign.)

b-2. Which location would produce the greatest profit?

Problem 8-9 involves calculating composite scores based on various qualitative factors for each location, leading to the selection of the best site based on maximum score.

Finally, a problem involves determining the optimal warehouse location for a toy manufacturer by computing the coordinates that minimize transportation distances, based on given location points.

Paper For Above instruction

The decision to expand a business and select new locations involves detailed financial and qualitative analysis. For Genuine Subs, Inc., the first step is to determine the minimum sales volume needed at each potential site to generate a specified profit, considering fixed and variable costs.

Calculating the breakeven volume requires setting up the profit equation. The profit equals total revenue minus total costs, where total revenue is the product of the selling price per sandwich and the volume, and total costs are the sum of fixed costs (rent and equipment) plus variable costs (labor and materials).

For each location, the profit formula is:

Profit = (Selling price per sandwich × volume) - [Fixed costs + (Variable costs per sandwich × volume)].

To achieve a profit of $10,000, the volume (V) must satisfy:

$10,000 = (2.59 × V) - [Fixed costs + 1.80 × V].

Rearranged, this becomes:

V = ($10,000 + Fixed costs) / (Selling price - Variable costs).

Applying this to each location provides the required sales volume:

  • Location A: V = ($10,000 + 5,080) / (2.59 - 1.80) ≈ 15,907 sandwiches.
  • Location B: V = ($10,000 + 5,600) / (2.59 - 1.80) ≈ 17,186 sandwiches.
  • Location C: V = ($10,000 + 5,780) / (2.59 - 1.80) ≈ 17,613 sandwiches.

Next, assessing expected sales against these thresholds indicates whether achieving the profit goal is feasible, and the respective profit margins are calculated based on projected sales.

For instance, at Location A, with an anticipated sale of 20,300 sandwiches, profit is computed by:

Profit = (2.59 × 20,300) - [5,080 + (1.80 × 20,300)] ≈ $10,677.

Similarly, profits for locations B and C are calculated, revealing which site offers the highest return. For B, profit approximates $11,255; for C, about $11,556, making Location C the most profitable among these options.

Additionally, qualitative analysis involves assigning scores to locations based on convenience, parking, display area, shopper traffic, operating costs, and neighborhood qualities. These scores are weighted to compute a composite score for each location, which guides site selection beyond mere financial metrics.

Using criteria weights and ratings, composite scores are calculated for each site, with the highest score indicating the optimal location. This comprehensive evaluation ensures that the selected location balances financial viability with strategic advantages, such as accessibility and customer traffic.

Finally, the optimal warehouse placement for a toy manufacturer is determined via geographic coordinate analysis. The coordinates of existing locations are used to calculate the centroid, minimizing transportation costs. The centroid coordinates are obtained by averaging the x- and y-coordinates of all locations, which provides a simple yet effective method for central placement in logistical planning.

References

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