What we know: Charlie sells around 12 cases of hamburgers weekly. Each case contains 80 hamburgers. Each hamburger patty costs $.60. New vendor offer: Week 1 order: 50 cases at $.30 per patty Then 15 cases for the next 12 weeks at $.45 per patty What we are looking for: The price per patty quoted by the new vendor is attractive, but is this a good deal for the restaurant? Beyond the cost savings, what other factors need to be considered before buying a lot more hamburgers than you have sold in the past? How can Joe make this deal more attractive to Charlie? Solution Plan:
1. How many hamburgers does Charlie normally sell during the period of the contract?
2. What is the total cost of the hamburger inventory for the period?
3. How many hamburgers will Charlie need to purchase under the new vendor contract?
4. What is the total cost of this inventory?
5. What is the average cost of a hamburger under this deal? 6. What is the percent savings per hamburger under the new deal?
7. What is the cost savings in total, if Charlie accepts the new vendor deal rather than buying the same amount of hamburgers at his current vendor price?
8. If hamburger sales remain stable at 12 cases per week during this period, how many hamburgers will Charlie have remaining in inventory at the end of 13 weeks?
9. If hamburger sales remain stable at 12 cases per week into the future, how many weeks will it take to sell the remaining hamburgers?
10. If Joe can figure out a way to sell 14 cases a week, how many weeks will it take to sell all of the new vendor inventory?
11. Beyond the price per patty savings, what factors should Joe consider when advising Charlie whether or not to take the new deal?