Johnnys Dynamo Dogs has a drive-through line. Customers arriving at this line during the busy hours (11:00

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Johnny€™s Dynamo Dogs has a drive-through line. Customers arriving at this line during the busy hours (11:00 A.M. to 1:00 P.M.) either orders items a la carte or on a value-meal basis. Currently 25% of meals are sold as value meals at art average contribution margin of $2.25. The A Ia carte meals earn $3.00 per meal but take longer to prepare and this slows the line. The following are the interarrival times that were recorded over the last 3 weeks of operation.
Interarrival Times for 500 Observations
Time between Arrivals (minute) Number of Occurrences
1 .............. 100
2 .............. 150
3 .............. 125
4 .............. 100
5 .............. 25
In addition, the following service times for a Ia carte and value meals were recorded:

Johnny€™s Dynamo Dogs has a drive-through line. Customers arrivin

John Cottrell (€œJohnny€) has observed that because of street traffic the store loses all the potential customers who arrive when 4 cars are in the drive-through tine (i.e., the line never exceeds four customers).
(a) Simulate a 1-hour time period for the current mix of a Ia carte and value-meal orders. To start, assume two cars are in the line, each with 2-minute service times, Determine the number of meals served, the income from those meals, and the number of missed sales because customers go elsewhere.
(b) Johnny is contemplating a reduction of $0.25 in the prices of value meals. He believes that this will increase the percentage of meals that are value meals form 25% to 40%. This will result in faster service time and fewer lost sales. Using simulation, determine if this change will be financially beneficial. Assume that the benefits will be available for 2 hours a day over a 20-daymonth.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Operations management

ISBN: 978-0132163927

10th edition

Authors: Jay Heizer, Barry Render

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