you are considering opening a dollar store in which each ite

you are considering opening a dollar store in which each item sells for $1. A franchise that provides the merchandise and stock it on your shelves cost $50,000/year. the monthly customers and to organize the store. the hourly rate for each of your employees is $15/hour including benefits and you intend to open the store 8 hours a day, 7 days a week. You can assume that a month is 30 days and there is no shortage of people to work over weekends at the same rate of $15/hour. Suppose that, on average, customers is expected to buy $5 worth of items when s/he visits the store. Answer the following show your work calculations: a) To determine the feasibility of the project, calculate the average number of customers per hour must visit your store before you start making profit. b) Suppose that the margin of error for the demand estimate of$5 per customer is +-20%. How does this affect your solution in (a).

Solution

Answer a:

Information about number of employees in store and cost of goods sold for $5 to customers are missing. It has been assumed that there is one employee and cost of goods sold is $1 for $5 charged from customers-

Minimum 8(approx) customers are required to meet hourly cost. Beyond 8 customers organization will start generating profit.

Answer b:

We can see if customer buy +20% i.e. $5 +20%= $6 (cost of goods sold $1.2), only 7 customers per hour are needed to recover hourly cost. Whereas if customer buy -20% ie $5 - 20% = $4 (cost of goods sold $ .80), number of customers required to meet hourly cost have increased to 10.