**Citywide Spirits Shoppe**

**Group 4 Consulting, Inc.:**

Suzie Kebabchyan

Frances Ko

Luis Patlan

Stevie Post

Hayk Sahakyan

Ruian Yu

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

H

a

:

the mean Day customer purchase is not equal to the mean Evening customer purchase

Two-tailed Test

H

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;

H

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.