Strategic Management Calculations Assignment 2022

Strategic Management Calculations
INTRODUCTION
Two business models are presented below for the purpose of calculating their gross
revenues based on various situations. The first business in consideration is the car wash
which has 6 bays and operates for 48 hours. It offers two types of services car wash and
vacuum cleaning and it has 12 employees. For car wash charges are $40 per car while
$10 is charged for vacuum cleaning. Calculations have been done to show gross profit
when the business is running at full capacity continuously for 48 hours and when it is
operating at a capacity of 75% with employee breaks in between.
Task 2 is a kebab business where it is produced and delivered in a van. The period of
operation is 98 hours. There are four employees and it takes 5 minutes to produce one
kebab and 6 of them roll out at the same time. Gross revenue has been calculated when
production is at full capacity with employee breaks factored in also when the production
is at 75% of its capacity with employee breaks included.
Finally gross revenue and net profits have been calculated for a coffee shop which serves
16 people per hour and runs for 48 hours. It costs 30 cents to produce coffee which then
sells at$4.50
Calculations are explained and a table is attached to support them.
Task 1
1.Calculating the maximum gross revenue for the business of the car wash assuming all
the bays are operating continuously for a 48 hour period:
Total number of bays= 6
Length of the operations period: 48 hours or 4 working days of 8 hours each.
Washing: takes 20 minutes @ $40 per wash
Vacuum cleaning: takes 10 minutes @ $10 per cleaning.
Washing
Working hours per day= 8 which is equivalent to 8x60 =480 minutes

The maximum number of cars to be washed per day= 480 minutes divided by 20 minutes
(480/20) =24 cars washed per day. For the 48 hour period or four days, 24x4= 96 cars
washed
Gross revenue for the washings: 96x$40= $3840
Vacuum cleaning:
Working hours per day= 8 which is equivalent to 8x60 =480 minutes
The maximum number of cars to be washed per day= 480 minutes divided by 10 minutes
(480/10)=48 cars vacuum cleaned per day. For the 48 hour period or four days, 48x4=
192 cars cleaned.
Gross revenue for vacuum cleaning: 192x$10= $1,920
Total gross revenue for the Car Wash: $3,840
$1,920
Total gross revenue, 48 hours $5,760
2. Calculating the maximum gross revenue of the business operating with employee
breaks included and all bays active only 75% of the 48 hour period.
(It is assumed that employee breaks will not affect operations because they go in turns at
different periods)
Maximum gross revenue: 75% x 5,760= $4,320.
Task 2
Business period 98 hours
Minutes in 98 hours= 5880
Calculating the maximum gross revenue for the kebab van in every 98 hour period.
The number of kebabs produced in the 98 hour/5880 minute period: 5880 minutes
divided by 5 multiplied by 6 (5880/5x6) = 7056 kebabs. Assuming that all the kebabs are
sold, the gross revenue is 7056x $10= $70,560.
Calculating the maximum gross revenue for the kebab van in every 98 hour period
inclusive of employee breaks: During the 98 hour period, there are 11-hour breaks. If for

98 hours gross revenue is $ 70,560 what about in 87 hours (98 less 11)? It is
$70,560/98= 720x87= $62,640.
If the business operates at an efficiency of 75% including employee breaks, the gross
profit will be$62,640x75%= $46,980
Competitor’s Business
Calculating the gross revenue of the coffee shop in 48 hours, assuming that it serves 16
people per hour: 48x16=768 x $4.50= $ 3,456.
Cost of production: 768x$.30= 230.40
Net profit= Gross revenue less cost of production= $3,456 less 230.40= $3,225.60
Task 3
INTRODUCTION TO TASK 3
People in business often face the critical decision as to whether to start a business of scratch or
buy an existing one. The following is a discussion evaluating the merits and the demerits of
either purchasing a running business or establishing one. All the factors that are to be taken into
consideration a so as to reach the final decision are spelled out based on the gross revenue. It
takes into consideration all the factors that might influence decision making in this matter. The
recommendation that is given at the end of the discussion is presented in the conclusion.
Purchase or Open Your Own
A calculation of the gross revenues from the coffee shop makes the business to appear very
juicy. Since the production costs are very low the rate of return is very high. The production cost
of coffee is only 7% of the selling price. The profits accruing from this business look very
lucrative.
A careful analysis, however, must be done to determine which one is the best decision to make;
to buy the existing and running coffee shop or establish one from the scratch to compete with it.