a) A store\'s normal opening hours are from 9am to 5pm. The store keeper is thin

Question

a) A store's normal opening hours are from 9am to 5pm. The store keeper is thinking about extending these hours to 8pm. To determine if this may be profitable the manager experimented with the idea for one month and observed the following: Hours 5-6 pm 6-7 pm 7-8 pm Number of Customers 40 20 For each additional hour that the store remains open, the manager needs to pay an attendant 10 Ghana cedis and incur an additional cleaning cost of 1.75 cedis per customer served. Assume these late customers who come in after 5 pm spend an average of GHe2. Given this information. when should this store close to maximize profit? 10 marks

Explanation / Answer

To find the maximum profit we need to compute the cumulative revenue and cost.

For calculating cost,

5-6 pm = (40/10)+(1.75*40) = 74

6-7 pm = (40/10)+(1.75*20) = 39

By taking the difference between cumulative revenue and cost we get the profit maximum at 6-7 pm and from there after it starts ro decline. So the profit is maximum till 6-7 pm and the store should close by 7 pm

Hours Number of customers Revenue in Ghana Cost in Ghana Cum. Revenue Cum. Cost Cum. Profit 5-6 pm 40 80 74 80 74 6 6-7 pm 20 40 39 120 113 7 7-8 pm 8 16 18 176 170 6

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