Assignment task: Michael and Anthony own Star Struck Delicatessen in West Hollywood. They want to expand their current fast-casual lunch and dinner business to begin offering prepared food items. As their first new product, the partners decide to introduce a celebrity's gift basket. Annual demand for the item is 1,800 units. Order costs are estimated at $17.50 and holding costs at 22% of the purchase price of the item; baskets sell for $45.99 each. In terms of cosmetic changes to the dining area, one 4-seat booth must be removed to make room for the large cabinet that will display the product.
To accommodate this expansion, a local licensed contractor must be secured to (1) remove the booth and create the space [1 day]; (2) run wiring to provide lighting to the display cabinet [0.5 day]; (3) reconstruct the interior wall [2 days]; and (4) paint the dining room [2 days]. Setup to clear the dining room for painting must be done the day before the painter arrives [1 day] and, once the paint is dry, the dining room must be reassembled [1 day]. The partners will search thrift furniture stores to find a cabinet that works with the existing interior design [3 days]. Depending upon the condition of the piece, some restoration may be necessary; however, in any case, the cabinet will require recessed lighting before being set in place. As the contractor does not work with furniture, a design specialist will be hired to ready the piece [3 days]. Building permits must be secured from the city of West Hollywood for these renovations. With a stamped set of architectural drawings and engineering plans [10 days], the permit process should move quickly [0.5 day]. [MO 5.3]
Directions
As a business consultant, prepare a briefing that provides the owners with the information detailed below. The documents should be well written and include an opening paragraph that clearly articulates the purpose of the report. Be sure to properly insert tables and figures using APA format.
1. Regarding the gift baskets themselves, determine the optimal order quantity. What are the critical assumptions behind this calculation?
2. Concerning renovations, prepare an activity table of steps to complete the project. Estimate the overall completion time for the project.
3. Using an Excel template, construct a Gantt chart for the project.
4. Discuss any potential opportunity loss the owners of Star Struck may encounter from this product expansion.