Assume that you are Janice Wilton and you have been asked to elaborate

QUESTION

Assume that you are Janice Wilton and you have been asked to elaborate on the memo in Exhibit1 to address the issues raised by Ted Radcliff in both of his conversations with you. Use thereport form from the course website and please be certain to address all of the following issues:Q. 1.What conditions would justify the assumption of a constant contribution margin percustomer? Do you think those conditions are likely to hold here? To support yourconclusions, do a scatter plot of the sample data, and then use the sample data to run aregression of purchase costs (dependent variable) on purchase revenues (independentvariable). [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 thanday customers? Support your answer by performing a statistical test on the differencebetween 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 theerrors in her analysis, if any. [Hint: Think about Ted Radcliff’s questions.]Q. 4.What closing time should 21st Century Liquors choose to maximize profits? Calculate theincrease in profits (relative to the current closing time of 10pm) that would result fromextending store hours to 4am. If you recommend a different closing time, calculate theincrease in profits (again relative to the current closing time) that would result from yourrecommendation.Q. 5.a.Calculate the breakeven number of additional customers for each added hour ofoperation 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, ifit differs from 4am.c.Find the safety margin on new customers for the year. [Hint: For the per-yearanalysis, remember to account for the cost of the security upgrade. Use straightline depreciation as a measure of the fixed cost of the security upgrade, and thenadd the cost of overtime labor for the additional hours of business for each of the360 business days in the year.]Q. 6.If there are any additional issues you think are relevant to the choice of closing time, besure to mention them. Is there anything missing from the analysis? Are there anymatters that require additional data collection or research?The contribution margin I calculated is 7.18 ( I use revenue minus cost, and then find the averagenumber, but I’m not sure if its right).For the depreciation cost is 3000 per year. Other data is on the following pages.

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