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Little Chicken is a local fried chicken stand owned by your friend, Tom. Tom knows a lot about fried chicken, but not so much about business. In an attempt to boost his sales, Tom recently purchased a mini fridge. The refrigerator is consistently stocked with various beverages for his customers to take free of charge. Tom does not like to be controlling, so he allows his customers to take as many beverages as they need. Since purchasing the mini fridge, Tom has noticed a considerable increase in fried chicken sales but is concerned at how often he also restocks drinks.
Tom would like to evaluate the current state of his sales. He has been keeping an eye on how many drinks customers take each time they buy some chicken, recording the number of bottles alongside the quantity of chicken in their order. Tom is also interested in knowing whether his mini fridge decision has been more profitable for his stand. He has provided you with data on chicken order quantities before and after the purchase of the minifridge for comparison.
Tom purchases and sells his chicken for $0.99 and $3.99 per piece, respectively, and spends an average of $1.59 per bottle on drinks.
Using the datafile linked below, compute the information Tom needs to evaluate the current state of his stand. Tom will need to know the following:
- Total Sales for both periods (Before/After the purchase of the mini fridge)
- Total Expenses for both periods, and
- Total Net Income (Profitability) for both periods
Do you think the mini fridge strategy is effective? What changes would you like Tom to make?
Suggestions and Hints
- Net Income = Sales - Expenses
- Since Tom didn’t own a mini fridge at the time of some chicken sales, you can assume that the drink expenses for this period were zero.