the following data are available with respect to the coffee shop of a company for a 608272
The following data are available with respect to the coffee shop of a company for a week:
|
BEP |
2,00,000 units |
|
Profits when 2,40,000 units are sold |
Rs. 80,000 |
|
Variable Cost to Sales Ratio |
60% |
Coffee shop remains open from 8 a.m. to 8 p.m. everyday. The manager is considering an extension of operations under two distinct proposals. Proposal I suggests operations till mid-night and this will increase the sales by Rs. 24,000 per week and involve additional costs on waiters, clerks and so on of Rs. 8,000 per week. The other alternative is to operate 24 hours a day. This will add to sales by Rs. 40,000 per week and involve additional costs on staff of Rs. 18,000 per week. Variable Costs (only on provisions) approximate about 40% of the sales price.
You are asked to evaluate whether the shop should remain open from 8 a.m. to 8 p.m. or 8 a.m. to midnight or 24 hours a day from the view point of profitability.