Computation of Attraction

Ted Radcliff, who was the general manager of B&J Beverages, demanded Janice Wilton, his operations manager, to research whether it was economical for the B&J Beverages to stay open until 4 a.m. under the Gould state legislation which allowed a sale of alcoholic beverages until 4 a.m. B&J Beverages was being run by a store manager, an assistant manager, and two sales and inventory clerks. Janice Wilton asked her accountant, Shawna Hakimian, to provide her with some data on the revenue and costs for the store. Shawna selected two random samples of 30 customers each and analyzed what they had bought and the cost of the items that they had purchased. One sample represented “day customers” who purchased before 6 p.m. and the other was for “evening customers” who purchased after 6 p.m. Then, it turned out that it will be necessary to pay a 50% overtime bonus to their two night salespeople at the store after midnight. Also, the company needs to invest in a better security system, which was an estimated $21,000 in construction and rewiring cost. The improvements will have a life of seven years and they depreciate their assets using the straight-line method, and will have no salvage value. After seeing through results from Shawna, Janice Wilton experimented with different closing times for the store, and then analyzed the data. It showed the following results by opening the store: There was an average of five customers per hour from 3 a.m. to 4 a.m. The typical customer makes purchases of about $29, and $22 all of which goes to their purchase of the alcohol, which leave them $7 of contribution margin. There was an increased annual profit of $113 per day, or $40,680 per year, before taxes. Despite all of this data provided, Ted had not yet been convinced, and pointed out unclear parts of these data. First, he pointed out the “marginal approach” from the data. Secondly he pointed out the reason of using the average purchase over all hours of operation. Lastly, he brought up...