Case ON-THE-GO: Cost-Volume-Profit Analysis Peter Kankel, the CFO of On-the-Go convenience stores, had only a couple of hours to decide what he would recommend. Decisions to add products are often challenging. Kankel knows that modern convenience stores have to do more than just remain open late into the evening and offer a diverse product assortment; they have to change with the times or face extinction. Over the years, On-the-Go has stocked new products and services, such as gasoline, lottery tickets, and even Internet shopping and delivery services. A walk through any of its stores is likely to reveal in excess of 2,000 different products and services, often available 24 hours a day, seven days a week. There are close to 150,000 convenience stores scattered across the United States. The industry generated $350 billion in sales for 2011 On-the-Go Stores, based in Newport, Rhode Island, operates 82 stores in its chain of conve- nience stores. Locations are primarnily in the New England and Mid-Atiantic regions of the United States, where there are about 20,000 convenience stores-approximately 13% of the contry's total. The average sale is $3.00, with a gross margin of 30%. Recently, On-the-Go has faced some challenging decisions. For example, company man- agers recently evaluated the effect on income of the store's sales mix and performed sensitivity analysis to see the effect on operating income of changing the selling price of milk. Kankel was currently evaluating two major decisions. The first decision related to the sale of money orders at its stores. This was a new product area for the company-a "financial service," much like what a bank would offer. By offering this new service, On-the-Go hoped to boost its customer count. Previous studies had shown that customers were lkely to buy more than just the items they originally intended to purchase. So, On-the-Go want store-and buy more than intended. ted to boost sales revenue by giving customers another reason to come into the Kankel had obtained the following information. The cost of renting the machine for each store to prepare money orders is $30 per month. The lease rent for the store is $5,000. For each money order processed, On-the-Go would pay a processing fee of 6 cents. After conducting an informal survey of banks and other local businesses that offered money order Go found that most charged 99 cents for each money order transaction. On-the-Go planned to set its money order fee at 79 cents to undercut local competition. Kankel estimated that a money order transaction would take one counter clerk 90 seconds to complete, versus only 30 seconds for ringing up a product sale. The average hourty wage for a store clerk is $12.00 per hour. On-the-Go does not plan to hire any new clerks or ask existing clerks to work longer hours t it decides to sell money orders Kankel then turned to the second major decision he faced: Should On-the-Go sell in-store deli sandwiches to lunchtime customers? If it chose to sell deli sandwichesOn-the-Go cold either prepare these sandwiches in-store or purchase prepackaged deli sandwiches from an outside vendor. It would cost $3.50 to purchase the sandwiches. If it made the sandwiches, the cost of the ingredients would be $2.50 per sandwich. One of On-the-Go's senior employees, who is paid $15 per hour, would prepare the sandwiches during the lunch hour. On-the-Go would then have to hire a temporary worker for the 2-hour lunchtime period to manage other activities in the store. The temporary worker would be paid $10 per hour. The average selling price of a del sandwich is S4.50On-the-Go antipates selling 12 sardwiches per hour. Al other costs would be unchanged whether On-the-Go buys the sandwiches, makes the sandwiches, or chooses not to sell sandwiches at all