1 / 12

“Mexican” fast food

“Mexican” fast food . Greg Gerold Harry Wong ESE 251. Model. Open 70 hours a week Taxes/ Rent … -> 2000 USD per week Labor Cost -> 10 USD/hr Weighted average cost of all items -> 2.53 USD/item. Regimes. WAP (weighted average price) of 6.50 USD

gochoa
Download Presentation

“Mexican” fast food

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. “Mexican” fast food Greg Gerold Harry Wong ESE 251

  2. Model • Open 70 hours a week • Taxes/ Rent … -> 2000 USD per week • Labor Cost -> 10 USD/hr • Weighted average cost of all items -> 2.53 USD/item

  3. Regimes • WAP (weighted average price) of 6.50 USD • 40 items were sold per an hour and 6 people were required • WAP of 7 USD • 20 items were sold per an hour and 4 people were needed

  4. Profit • Profit = total revenue – total cost • @ $6.50 = $4,916 • @ $7.00 = $1,463 • Is there a price regime within the range that maximizes profit?

  5. Model • Cobb - Douglas Equation • Based on least squares regression fitting of statistical data. • are constants with respect to time. • Beta =1 as K is constant • L = man hours • K= capital (rent, taxes…) • Y = productivity factor

  6. Solutions • Algebraic solution • Two regimes two unknowns • Y= 0.0000484 • alpha=1.71

  7. Optimization • Profit = Total Revenue – Total Cost • Optimal at: • 0 = Marginal revenue – Marginal Cost

  8. Marginal Functions

  9. Demand Estimation • Assume demand can be modeled by: • P(Q) = a – b*Q • 7.00=a - b * 1400 • 6.50=a – b * 2800 • Solve two simultaneous linear equations • a= 7.49, b=0.000357

  10. Finding the Optimal Solution • There are two solutions within the domain • One is 2 burritos a week • The other is 11,120 burritos • So plugging in this quantity to the Profit equation we get: • $6574/week

  11. Logistics • Labour • 13.5 employees working 70 hour weeks • 944 total hours • Pricing • $3.97

  12. Analysis • Sensitivity • Price • Quantity • What if?

More Related