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# Citywide Spirits Shoppe

PDS Class: DTR Project
by

## Frances Ko

on 18 April 2014

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#### Transcript of Citywide Spirits Shoppe

Citywide Spirits Shoppe
Group 4 Consulting, Inc.:
Suzie Kebabchyan
Frances Ko
Luis Patlan
Stevie Post
Hayk Sahakyan
Ruian Yu

What is a Contribution Margin?
Contribution Margin
is the amount remaining from S
ales Revenue
after
Variable Costs
have been deducted.

CM = SR - VC
What Closing Time Maximizes Profit?
Maximum Yearly Profit = \$ 38,959.20
Profit Chart
What should Citywide Spirits do?
Employee Safety
Neighbor Complaints
Property Damage

Two-tailed T-test: a statistical test in which the critical area of a distribution is two sided and tests whether a sample is either greater than or less than a certain range of values.

What is a Two-Tailed Test?
A statistical test in which the critical area of a distribution is two sided and tests whether a sample is either greater than or less than a certain range of values.
Two-Tailed Test
H
o
(null hypothesis)
:
the mean Day customer purchase is equal to the mean Evening customer purchase

a
:
the mean Day customer purchase is not equal to the mean Evening customer purchase
Two-tailed Test

o
: μ1 = μ2
H
a
: μ1 = μ2

T-value : -1.395

T Critical value : approximates ± 2.002

-2.002 < t-value < 2.002

Retain
H
o
P-value
= probability of getting a sample statistic as extreme (or more extreme) than the sample statistic you got from your sample, given that the null hypothesis is true

P (T≤ t) two-tail : 0.1681

The chance that two sample are equal is 16.81%

P-value
Retain H
o
if p-value > significance level (alpha=0.05)

0.1681 > 0.05 (p-value significance level)

Retain H
o

P-value
Breakeven Number
For
Each
Added
Hour
Annual Breakeven Number for 4:00 AM
Annual Breakeven Number for 2:00 AM
Annual Safety Margin for 2:00 AM
What is a Safety Margin?
Straight Line Depreciation
What is a Breakeven Number?
The depreciation value is calculated by dividing the value of the asset by the useful life of the asset.
The amount by which a company's sales could decrease before losing profit.
The amount by which a company's sales is exactly enough to cover it's expenses.

H
o
: μ1 = μ2;

a

: μ1 ≠ μ2

We assume
a

= 0.05 (probability distribution for a 95% confidence level)
Two-Tailed Test
We conclude that there is no significant difference between the average of the day customers' and evening customers' purchases.
Case Facts
Can now sell alcohol until 4am
Losing money in recent years
Should the shop extend its hours?
What is the most profitable closing time?
Case Facts
Operations Manager, Janice Wilton, will further investigate

Must take into account any additional costs associated

Janice predicts the best closing time to be 4:00 AM
Janice's Original Chart
Do Evening Customers Purchase More than the Day Customers?
Marginal Revenue > Marginal Cost
Annual Safety Margin for 4:00 AM
Objective
How long should Citywide Spirits Shoppe extend its hours of operation?
Location
Source of Demand
The Power of External Environments
Nearby
Establishments
Target Marketing
Demographics
Strategic Decisions
Customer Opportunity Costs
Traffic
Competition
Crime Rate
Seasonal Consideration
Thank You
Closing at 2:00 AM
Regression Analysis
N
o
(null): y-intercept = 0
N
a
: y-intercept ≠ 0

[
y-intercept represents the purhase costs
]

p-value >
alpha
(0.05); fail to reject the null
p-value <
alpha
(0.05); reject the null
Null Hypothesis
Marginal Revenue & Marginal Cost
Analysis
P-value = 0.539

0.539
>
0.05

Fail to reject the null (
H
o
)
H
o
: y-intercept = 0
Null Hypothesis
y = 0.7327x + 0.6848
R Square = 0.8743
Appendix
Fig. 1A
Appendix
Appendix
Fig. 1B
Janice Wilton
Appendix
Ground Rules
Please
:
Turn off and put away cell phones and devices
Refrain from talking
Save all questions until the end of presentation
Fig. 2B
Fig. 2A
\$5,227.20 of
overstated
Profit
Does Citywide Spirits Shoppe Have A Constant Contribution Margin?
Contribution Margin: Conclusion
Y-intercept = 0.

If an intercept is equal to 0, there are no Fixed Costs.

No fixed costs justifies a constant contribution margin.
Contribution Margin is Constant
What is a Null Hypothesis Test?
The main purpose of a hypothesis testing is the difference between two competing hypotheses about the value of a population parameter.
Full transcript