CMI 2023 | Data Science | Part B | Question: 19

Question

Burger Paradise plans to expand to other cities and is considering opening a new branch in Coimbatore. They have identified three potential locations, $A, B$ and $C$, and are evaluating the profitability of each location. Based on their research, they estimate that the fixed cost for opening a new location will be ₹ $50,00,000$, ₹ $70,00,000$ and ₹ $65,00,000$ at $A, B$ and $C$, respectively. They also estimate the variable cost per customer to be ₹ $85$ and the average revenue per customer to be ₹ $150$ at all three locations. They expect to serve $100,000,150,000$ and $130, 000$ customers in the first year at locations $A, B$ and $C$, respectively

Which location in Coimbatore is expected to be the most profitable in the first year of operation, and what is the expected profit at this location?

Answer 1

Given Three locations are A, B, C and their Investments are 50,00,000, 70,00,000 and 65,00,000  Rupees Respectively.

And also given that:

Variable Cost per one customer = 85 /-

Revenue Per one customer = 150 /-

 Therefore the Profit  = S.P-CP 

                                  = 150-85 = 65 /-

 

Now the no. of customers visits all the Three Locations A, B, C is 1,00,000 1,50,000 and 1,30,000 in the first year Respectively.

Income and profits at Three locations in the first Year is :

 

At Location A

Income =65 * 1,00,000 = 65,00,000/-

Profit = Income - Investment

         = 65,00,000-50,00,000

        = 15,00,000 /-

 

At Location B

Income = 65× 1,50,000 = 97,50,000 

Profit = 97,50,000-70,00,000= 27, 50,000 /- 

 

Similarly , At Location C

Income = 65 x 1,30,000 = 84,50,000 

Profit = 84, 50,000-65,00,000 = 19,50,000 /- 

Hence the Location " B "  will get the Maximum profit in first year of operation with 27,50,000 Rupees.