Calculation of maximum gross revenue of the business operating continuously 3 Task 1 3 1.1 Calculation of maximum gross revenue of the business operating continuously 3 Task 2 6 2.1 Calculation of max

Task 1 1.1 Calculation of maximum gross revenue of the business operating continuously Given that, Total period in observation = 48 hours Also, it is given that washing bays take 20 minutes and charges $40 per wash whereas, vacuuming bays take 10 minutes per car and charges $10 per vacuum.

Strategic and Operations Management

Table of Contents
Introduction................................................................................................................................3
Task 1.........................................................................................................................................3
1.1 Calculation of maximum gross revenue of the business operating continuously............3
1.2 Calculation of maximum gross revenue of the business operating with breaks and lower
efficiency................................................................................................................................4
Task 2.........................................................................................................................................6
2.1 Calculation of gross revenue assuming full capacity.......................................................6
2.2 Calculation of gross revenue considering employee breaks............................................7
2.3 Calculation of gross revenue considering employee breaks and lower efficiency..........7
Task 3.........................................................................................................................................8
Conclusion..................................................................................................................................9
List of Tables
Table 1: Calculation of maximum gross revenue of the business operating continuously........4
Table 2: Calculation of maximum gross revenue of the business operating with breaks and
lower efficiency..........................................................................................................................6
Table 3: Calculation of gross revenue assuming full capacity...................................................6
Table 4: Calculation of gross revenue considering employee breaks........................................7
Table 5: Calculation of gross revenue considering employee breaks and lower efficiency......8

Introduction
The modern business situations require from managers to make quick estimates using
numeracy skills. This assignment focuses on the application of fermi techniques to business.
Various problems of different supply chain have been discussed using several choices to
maximise revenue and profits. Task 1 discusses car was business situation by simplifying the
solution. Task 2 explains the systematic approach to gross revenue at different situations.
Finally, Task 3 analyses the available choices to provide quantitative justification for decision
making.
Task 1
1.1 Calculation of maximum gross revenue of the business operating continuously
Given that,
Total period in observation = 48 hours
Also, it is given that washing bays take 20 minutes and charges $40 per wash whereas,
vacuuming bays take 10 minutes per car and charges $10 per vacuum.
Since there are four washing bays,
The total output of washing process = 4 cars per 20 minutes or 12 cars per hour
Similarly, as there are two vacuuming bays,
The total output of vacuuming process = 2 cars per 10 minutes or 12 cars per hour
It can be observed here that hourly processing time for both the operation is same. Therefore,
idle time is zero. It means that the per hour productivity of the car wash business is 12 cars.
Now,
Total productivity during the observation period = operational time X hourly productivity
= 48 hours X 12 cars = 576 cars
Total revenue from car wash = total cars washed during the observation period X washing
charge per wash
= 576 cars X $40 = $23,040

And, total revenue from car vacuum = total cars vacuumed during the observation period X
vacuuming charge per vacuum
= 576 cars X $10 = $5,760
Therefore, the maximum gross revenue of the business operating all bays continuously in a
48 hours period = total revenue from car wash + total revenue from car vacuum
= $23,040 + $5,760 = $28,800
The above calculations are presented in following table 1
Particulars Qty Unit
Operational Time 48 hours
Washing Processing output 12 cars per hour
Productivity of washing process 576 cars
Washing Charge $40
Revenue from Washing $23,040
Operational Time 48 hours
Vacuuming Processing output 12 cars per hour
Productivity of vacuuming process 576 cars
Vacuuming Charge $10
Revenue from Vacuuming $5,760
Total Revenue
$28,80
0
Table 1: Calculation of maximum gross revenue of the business operating continuously
1.2 Calculation of maximum gross revenue of the business operating with breaks and lower
efficiency
Given that,
Total period in observation = 48 hours
As the employee break per 8-hour time period is to be taken into consideration, it can be
assumed that the car wash business takes one-hour break for all employees at the same time.
So, the operational time will be reduced by 48/8 = 6 hours.
Hence, period of observation will become = 48 hours – 6 hours = 42 hours

Also, as the bays are active for 75% of the period in observation the net business operation
time will be 75% of 42 hours, i.e., 31.5 hours
The processing time and charges of washing and vacuuming is same as above.
The total output of washing process = 4 cars per 20 minutes or 12 cars per hour
Similarly, The total output of vacuuming process = 2 cars per 10 minutes or 12 cars per hour
As the hourly processing time for both the operation is same, idle time is zero and the per
hour productivity of the car wash business is 12 cars.
Now,
Total productivity during the observation period = operational time X hourly productivity
= 31.5 hours X 12 cars = 378 cars
Total revenue from car wash = total cars washed during the observation period X washing
charge per wash
= 378 cars X $40 = $15,120
And, total revenue from car vacuum = total cars vacuumed during the observation period X
vacuuming charge per vacuum
= 378 cars X $10 = $3,780
Therefore, the maximum gross revenue of the business operating all bays continuously in a
48 hours period = total revenue from car wash + total revenue from car vacuum
= $15,120 + $3,780 = $18,900
Particulars Qty Unit
Observation Period 48 hours
Less mandatory break (48 / 8 = 6 breaks) 6 hours
Net period of observation 42 hours
Business Operational time (75%) 31.5 hours
Washing Processing output 12 cars per hour
Productivity of washing process 378 cars
Washing Charge $40
Revenue from Washing $15,120
Vacuuming Processing output 12 cars per hour

Productivity of vacuuming process 378 cars
Vacuuming Charge $10
Revenue from Vacuuming $3,780
Total Revenue $18,900
Table 2: Calculation of maximum gross revenue of the business operating with breaks and lower
efficiency
Task 2
2.1 Calculation of gross revenue assuming full capacity
Period in observation = 98 hours
Production time for kebab = 5 minutes
As 6 kebab can be produced simultaneously,
hourly production rate = 60 minutes / 5 minutes * 6 = 72 kebab per hour
Total production of kebab in the period = business operation time X hourly production
= 98 hours X 72 = 7,056 kebabs
As price of each kebab is $10, gross revenue in the period
= total kebabs produced in the time X business operational time
= 7,056 kebabs X $10 = $70,560
Particulars Qty Unit
Observation Period 98 Hours
Production time of 6 kebabs 5 minutes
Hourly production rate 72 Kebabs
Total production 7056 Kebabs
Price of 1 kebab $10
Gross Revenue $70,560
Table 3: Calculation of gross revenue assuming full capacity

2.2 Calculation of gross revenue considering employee breaks
Given that, employees take 1 hour break every 8-hour period.
It can be assumed that the kebab van business takes one-hour break for all employees at the
same time. So, the operational time will be reduced by 98/8 = 12.25 hours or 12 hours (round
up).
Hence, period of observation will become = 98 hours – 12 hours = 86 hours
As rest of the details are same as above, the hourly production rate is 48 kebabs per hour.
So, Total production of kebab in the period = business operation time X hourly production
= 86 hours X 72 = 6,192 kebabs
Since price of each kebab is $10, gross revenue in the period
= total kebabs produced in the time X business operational time
= 6,192 kebabs X $10 = $61,920
Particulars Qty Unit
Observation Period 98 Hours
Employee breaks (98 / 8 = 12 breaks) 12 Hours
Business operational time 86 Hours
Production time of 6 kebabs 5 Minutes
Hourly production rate 72 Kebabs
Total production 6192 Kebabs
Price of 1 kebab $10
Gross Revenue $61,920
Table 4: Calculation of gross revenue considering employee breaks
2.3 Calculation of gross revenue considering employee breaks and lower efficiency
Given that, employees take 1 hour break every 8-hour period and the kebabvan is operating at
75% efficiency.
It can be assumed that the kebab van business takes one-hour break for all employees at the
same time. So, the operational time will be reduced by 98/8 = 12.25 hours or 12 hours (round
up).
Hence, period of observation will become = 75% of (98 hours – 12 hours) = 64.5 hours

As rest of the details are same as above, the hourly production rate is 48 kebabs per hour.
So, Total production of kebab in the period = business operation time X hourly production
= 64.5 hours X 72 = 4,644 kebabs
Since price of each kebab is $10, gross revenue in the period
= total kebabs produced in the time X business operational time
= 4,644 kebabs X $10 = $46,440
Particulars Qty Unit
Observation Period 98 hours
Employee breaks (98 / 8 = 12 breaks) 12 hours
Net period of observation 86 hours
Business operational time (75% capacity) 64.5 hours
Production time of 6 kebabs 5 minutes
Hourly production rate 72 kebabs
Total production 4644 kebabs
Price of 1 kebab $10
Gross Revenue $46,440
Table 5: Calculation of gross revenue considering employee breaks and lower efficiency
Task 3
Given that the coffee shop serves 60% of car wash customers and operate in the same 48-
hour period as car wash. Hence, the number of customers served by the coffee shop in 48
hours duration will be 60% of cars services in the car wash. Further, it is assumed that the car
wash is operating with employee break. Because it has been observed that waiters of coffee
shop often socialise with car wash employees during the 1-hour break.
So, total number of customers at coffee shop during the business operation time
= 60% of 42 hours X 12 cars = 302 (rounding off)
Estimated revenue generated by the coffee shop during the observation period = Number of
customers X per coffee charge
= 302 customers X $4.50 = $1,359
Production cost of coffee = Number of coffees X per coffee cost = 302 X 0.30 = $90.6

Total profit generated during the 48 hours period = Revenue – Production cost
= $1,359 - $90.6 = $1,268.4
The profitability of the coffee shop business = Profit / Revenue X 100
= $1,268.4 / $1,359 *100 = 93.3%
Conclusion
Therefore, it can be said that the coffee shop business is quite profitable with high yield.
However, as the business is largely dependent on the car wash customers, owning a coffee
shop in competition don’t make sense. Competition will create division of customers among
the two coffee destinations and with limited number of customers the profitability will
decrease. On the other hand, making an offer to purchase the coffee shop will be profitable
and strategic choice as it may also help in existing business using promotional schemes etc.