Reference no: EM133424783

Case Study: 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 prepare 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]

Questions:

• As a business consultant, create a briefing that provides the owners with the information below. The documents should include an opening paragraph that clearly articulates the purpose of the report.
• Regarding the gift baskets themselves, determine the optimal order quantity. What are the critical assumptions behind this calculation?
• Concerning renovations, prepare an activity table of steps to complete the project. Estimate the overall completion time for the project.
• Discuss any potential opportunity loss the owners of Star Struck may encounter from this product expansion.