Question: A retail chain operates five stores in different locations. The chain has collected the following information from each of its stores last month ( see

A retail chain operates five stores in different locations. The chain has collected the following information from each of its stores last month (see the table below). Additionally, the chain has indicated that:
(1) $50,000 in monthly corporate overhead (fixed cost) should be distributed evenly among the five stores (i.e., $10,000 each);
(2) Labor cost per employee a month = $15,000;
(3) Monthly rent cost per square foot of floor area = $5.
Store Sales Revenue ($) Number of Employees Floor Area (sq. ft) Inventory Cost ($)
Store 1 $102,00041900 $25,000
Store 2 $120,00041800 $25,000
Store 3 $150,00062200 $35,000
Store 4 $128,00062600 $18,000
Store 5 $130,00041900 $32,000
Q1(1 pts): Alice, the HR manager, is interested in evaluating labor productivity across stores for last month. Labor productivity is defined by Alice, using sales revenue as output and the number of employees as input. Identify the store with the best labor productivity and calculate its labor productivity (rounded to five decimal places if not a whole number).
Q2(1 pts): Bob, the financial analyst, aims to assess multifactor productivity across stores for last month. Multifactor productivity is defined by using sales revenue for output as well as labor cost, rent cost for the floor area, overhead expense, and inventory cost for inputs. Identify the store with the best multifactor productivity and calculate its multifactor productivity (rounded to five decimal places if not a whole number).
Q3(2 pts): The bottom line for the management is every store should at least achieve break-even, meaning one dollar input cost generates at least one dollar revenue (i.e., a multifactor productivity of at least 1). If this bottom line was not met last month, the management plans to negotiate the rent for floor area with the landlord of these 5 stores to sign a longer term lease because their lease expires very soon.
Assuming sale revenues and labor, inventory, and overhead costs for the near future will remain about the same as last month, calculate the threshold (precise to the first decimal place) of the monthly rent per square foot for floor area for meeting the above bottom line. That is, as long as the floor rent is negotiated and lowered to this threshold rent, the above bottom line just starts to be met. If all stores met the above bottom line last month already, no calculation is needed and just answer "N/A" below.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!