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In the initial analysis, you might ask a number of questions, which will influence your decision.
Fairly soon in the process, you should start asking questions about the economics of the three options - in which case the interviewer will give you some more information:
In the initial research, the restaurant owner has found out the following information from the suppliers of the drying facilities:
At this point, it's obvious that from an economic standpoint, the option you select will vary with the number of customers. Therefore, it makes sense to look at a break-even calculation.
First of all, take the dryers. They cost $100 per month, plus an upfront charge of $1,000 that you should depreciate over their lifetime (i.e. an additional $1,000/(4 x 12) per month = $21 per month). Therefore their total cost is approximately $120 per month - and this does not vary with the number of customers coming into the restaurant.
Secondly, look at the paper towels option. These vary directly with the number of customers in the restaurant, at a cost of $0.05 per customer. Therefore with a low number of customers per month, paper towels will be cheaper than dryers will. How many customers would have to come to the restaurant each month to make the dryers more cost effective? The cost of towels would have to exceed $120 per month, equating to $120/$0.05 = 2,400 customers per month.
~Is this break-even affected by the rolls option? At less than 2,000 customers per month, the rolls would cost $10 every other day or $10 x 15 days = $150 per month. This in itself is more costly than both the dryer and the towels option, and with more than 2,000 customers, it will only look more unfavorable.
Therefore the real economic decision is between towels and dryers. At less than 2,400 customers per month (or 2,400/30 = 80 customers per night) you would prefer the towels. Once the number of customers increases above this, you'd switch to the dryers' option.
Following the economic analysis, you might mention a few more non-economic points that might sway the balance:
Hints on quantitative cases:
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