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Citywide Spirits Shoppe: Student Coaching Slides

Citywide Spirits Shoppe: Student Coaching Slides. Glen Whitman & Shahid Ansari. Basic Facts of the Case. New state law allows liquor stores to stay open until 4 a.m. Store currently stays open until 10 p.m. Based on her research, Janice Wilton recommended extending hours until 4 a.m.

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Citywide Spirits Shoppe: Student Coaching Slides

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  1. Citywide Spirits Shoppe:Student Coaching Slides Glen Whitman & Shahid Ansari

  2. Basic Facts of the Case • New state law allows liquor stores to stay open until 4 a.m. • Store currently stays open until 10 p.m. • Based on her research, Janice Wilton recommended extending hours until 4 a.m. • Ted Radcliff asked Wilton to check her analysis and revise her recommendations if necessary.

  3. Economics Background • Concept: Using marginal cost (MC) and marginal revenue (MR) to make profit-maximizing decisions • MC = additional cost from doing one more of something • MR = additional revenue from doing one more of something • Do more when MR > MC. Do less when MR < MC. This will maximize profits.

  4. Economics Background, cont. • MR/MC method is usually used to find profit-maximizing quantity of output. • But it can be used for many other things. • Here, it’s used to find how many hours to stay open.

  5. Accounting Background • Contribution Margin (CM) is sales revenue minus variable cost. • CM is usually per unit of output, but it can also be found for other cost objects. • In this case, we use the CM/customer. • CM/customer is the price of goods sold minus the cost of goods sold to the average customer.

  6. Accounting Background, cont. • Breakeven customers for a time period = added cost for that time period divided by CM per customer. • Safety margin = expected number of added customers minus breakeven number of added customers.

  7. Statistics Background • Regression of a dependent variable Y on an independent variable X gives you an estimated equation of a line: Y = a + bX a = coefficient on intercept b = coefficient on independent variable X • Use p-value on the intercept coefficient to see if it is statistically significant. p-value should be less than significance of .05.

  8. Statistics Background, cont. • Difference of means test: determines whether two samples are likely to have come from different populations. • In this case, are evening customers significantly different from day customers in their buying behavior? • Use two-tail test, because the difference could go either way. • Excel will do almost all of this for you!

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