Three years ago, Vincent Chow completed his degree in accounting. The economy was in a depressed state at the time, and Vincent managed to get an offer of only $20,000 per year as a bookkeeper. In addition to its relatively low pay, this job had limited advancement potential.

Since Vincent was an enterprising and ambitious young man, he declined this offer and started a business of his own. He was convinced that because of changing lifestyles, a drive-through coffee establishment would be profitable. He was able to obtain backing from his parents to open such an establishment close to the industrial park area in town. Vincent named his business The Cappuccino Express and decided to sell only two types of coffee; cappuccino and decaffeinated.

As Vincent had expected, the Cappuccino Express was very well received. Within three years, Vincent had added another outlet north of town. He left the day-to-day management of each site to a manager and focused his own attention on overseeing the entire enterprise. He also hired an assistant to do the record keeping and to perform selected other chores.

1. What is the competitive strategy of Vincents business cost leadership, differentiation, or focus?

2. What are the critical success factors of The Cappuccino Express? Which of these are controllable by Vincent?

3. What major tasks does Vincent have to undertake in managing The Cappuccino Express?

4. What are the costs of operating The Cappuccino Express? Choose a cost object and classify each of these costs as direct or indirect, fixed or variable, controllable or uncontrollable, product cost or period cost, or opportunity cost.