Hot Dog Cost Analysis

1. Hot Dog Cost Analysis
Shaun Witriol – Accounting
August 10
th
, 2012

2. Introduction
•This Hot Dog Cost Analysis has the items
broken down by Cost of Sales, Quantity Sold,
Total Cost of Sales, Total Revenue, and Price
changes for 2011 vs. 2012.

•It contains graphs, which are provided to give a
visual to aid in the proposed changes
recommended.

3. Cost of Sales
Item 2011 2012 Variance
Friar Frank $0.65 $0.72 $0.07
Kosher Dog $0.96 $1.04 $0.08
Big Dawg $0.96 $1.12 $0.16
Totals $2.57 $2.88 $0.31

4. Prices
Item 2011 2012 Variance
Friar Frank $4.00 $4.50 $0.50
Kosher Dog $6.25 $5.75 ($0.50)
Big Dawg $7.25 $7.00 ($0.25)
Totals $17.50 $17.25 ($0.25)

5. Item Sales
Item 2011 2012 Variance
Friar Frank 279,493 163,285 (116,208)
Kosher Dog 36,979 44,648 7,669
Big Dawg 25,283 33,648 8,365
Totals 341,755 241,581 (100,174)

6. Total Cost of Sales
Item 2011 2012 Variance
Friar Frank $181,670.45 $117,565.20 ($64,105.25)
Kosher Dog $35,499.84 $46,433.92 $10,934.08
Big Dawg $24,271.68 $37,685.76 $13,414.08
Totals $241,441.97 $201,684.88 ($39,757.09)

7. Total Revenue
Item 2011 2012 Variance
Friar Frank $1,117,960.00 $733,862.25 ($384,097.75)
Kosher Dog $231,109.75 $256,852.25 $25,742.50
Big Dawg $183,294.75 $235,425.25 $52,130.50
Totals $1,532,364.50 $1,226,139.75 ($306,224.75)

8. 279,493 Friar Franks sold
YTD (7-29-11) in 2011.
163,285 Friar Franks sold
YTD (7-29-12) in 2012.
This area represents the area where we may
consider lowering the price of Hot Dogs by $0.25.
This would increase Items Sold by 58,104, and our
Total Revenue by $246,942.
$1,117,960 Total Revenue
Earned YTD (7-29-11) in
2011.
$733,862.25 Total Revenue Earned
YTD (7-29-12) in 2012.

9. Graph Explanation
•There is a variance of -116,208 between the amount of Friar Franks sold in comparison of 2011 vs. 2012. There has also been a price increase of
$0.50, which has affected sales. In turn, we have also increased our costs, $0.07 per Friar Frank Hot Dog from the switch of Sysco to US Foods.

•A price decrease of $0.25 would give us an incremental increase over our current sales, YTD 7-29-12.

•The price reduction could increase our current sales of Friar Franks by 58,104 (116,208/2). This would increase our sales by $207,041. (163,285
(Current YTD 7-29-12 Friar Franks sold) + 58,104 (Increase in sales from price decrease) = 221,389 Total Friar Franks Sold - Fiscal Period Ending
in July.

•221,389 Friar Franks Sold x $ 4.25 (price reduction) = $940,903.25

•Current Year Friar Franks Total Revenue = $733,862.25

•Total Revenue Increase = $207,041.

•221,389 x $0.72 = $159,400.08 Total COS

•$940,903.25/1.0775 (Sales Tax) = $873,228.74 - $159,400.08 = $713,828.66

•If we forego labor rates and spoilage for next year, and only take into account rent (48.5%), which would be $423,515.94, that would leave us with
$290,312.72.

10. Sodas - Costs
Item 2011 2012 Variance
Grand Slam $0.66 $0.67 $0.01
Regular $0.38 $0.39 $0.01
Total $1.04 $1.06 $0.02

11. Sodas - Prices
Item 2011 2012 Variance
Grand Slam $5.50 $5.50 -
Regular $4.00 $4.00 -
Total $9.50 $9.50 -

12. Sodas – Item Sales
Item 2011 2012 Variance
Grand Slam 105,650 93,924 (11,726)
Regular 284,592 103,546 (181,046)
Total 390,242 197,470 (192,772)

13. Sodas – Total Costs of Sale
Item 2011 2012 Variance
Grand Slam $69,729.00 $62,929.08 ($6,799.92)
Regular $108,144.96 $40,382.94 ($67,762.02)
Total $177,873.96 $103,312.02 ($74,561.94)

14. Sodas – Total Revenue
Item 2011 2012 Variance
Grand Slam $581,075.00 $516,582.00 ($64,493.00)
Regular $1,138,368.00 $414,184.00 ($724,184.00)
Total $1,719,443.00 $930,766.00 ($788,677.00)

15. Price Point for Grand Slam
Sodas, which have been
consistent the past two
years - $5.50.
Price Point for Regular
Sodas, which have been
consistent the past two
years - $4.00.
Total Item Sales for Grand Slam
Sodas for YTD (7-29-11), which
total 105,650.
Total Item Sales for Grand Slam Sodas
for YTD (7-29-12), which total 93,924.
Total Item Sales for Regular Sodas for YTD (7-29-11),
which total 284,592.
Total Item Sales for Regular Sodas for YTD (7-29-
12), which total 103,546.

16. Price Elasticity of Demand (P.E.D.)
•If a small change in price is accompanied by a large change in quantity
demanded, the product is said to be elastic (or responsive to price changes).
The opposite also applies, a product is inelastic if a large change in price is
accompanied by a small amount of change in demand.

Reference:
http://www.investopedia.com/terms/p/priceelasticity.asp#ixzz23AYJ7wz1

17. Price Elasticity of Demand (P.E.D.)
(Calculation)
•A measure of the responsiveness of the quantity demanded of a good to a
change in its price. It is calculated as:

•The Percentage of Change in Quantity Demanded by the Percentage of
Change in Price.


Reference:
http://www.investopedia.com/terms/p/priceelasticity.asp#ixzz23AZ9Luvj

18. Hot Dogs Change in Quantity Demand
Item 2011 2012 Variance
Percentage of
Change
Friar Frank 279,493 163,285 (116,208) (71.17%)
Kosher Dog 36,979 44,648 7,669 17.18%
Big Dawg 25,283 33,648 8365 24.86%
Totals 341,755 241,581 (100,174) (41.47%)

19. Hot Dogs Change in Price
Item 2011 2012 Variance
Percentage of
Change
Friar Frank $4.00 $4.50 $0.50 11.11%
Kosher Dog $6.25 $5.75 ($0.50) (8.70%)
Big Dawg $7.25 $7.00 ($0.25) (3.57%)
Totals $17.50 $17.25 ($0.25) (1.45%)

20. Hot Dogs Price Elasticity of Demand
Item
Percentage of
Change in
Quantity
Percentage of
Change in
Price
P.E.D.
P.E.D.
Absolute
Value
Friar Frank (71.17%) 11.11% (15.61%) 15.61%
Kosher Dog 17.18% (8.70%) (50.63%) 50.63%
Big Dawg 24.86% (3.57%) (14.37%) 14.37%
Totals (41.47%) (1.45%) 3.50% 3.50%

21. Hot Dogs Price Elasticity of
Demand Evaluation
•The numbers on the right hand side of the Price
Elasticity of Demand for our three Hot Dogs show
how receptive they are to changes in pricing.
•What this tells us is that the sale of these items are
directly related to the related retail price.
•The higher the number above 1, the more elastic
the product.
•For this we can take the absolute value, and
associate it with the number 1. In this statistic, -1
and 1 are utilized in the same manner.

22. Sodas Change in Quantity Demand
Item 2011 2012 Variance
Percentage of
Change
Grand Slam 105,650 93,924 (11,726) (11.10%)
Regular 284,592 103,546 (181,046) (63.62%)
Totals 390,242 197,470 (192,772) (49.40%)

23. Sodas Change in Price
Item 2011 2012 Variance
Percentage of
Change
Grand Slam $5.50 $5.50 $0.00 0.00%
Regular $4.00 $4.00 $0.00 0.00%
Totals $9.50 $9.50 $0.00 0.00%

24. Sodas Price Elasticity of Demand
Item
Percentage of
Change in
Quantity
Percentage of
Change in
Price
P.E.D.
P.E.D.
Absolute
Value
Grand Slam (11.10%) 0% 0% 0%
Regular (63.62%) 0% 0% 0%
Totals (49.40%) 0% 0% 0%

25. Sodas Price Elasticity of Demand
Evaluation
•The numbers on the right hand side of the Price
Elasticity of Demand for our sodas show how
receptive they are to changes in pricing.
•What this tells us is that the sale of these items
are not related to the related retail price.
•These items have a elasticity of 0, which means
they are inelastic to their retail price.
•To clarify this more in-depth, there is no relation
of the sale of these items to its price.

26. Price Elasticity of Demand Findings
•What the P.E.D. of these numbers tell us is that the sale of
Hot Dogs raises the sale of drinks.
•As we can see that the sale of Hot Dogs (Friar Franks, Kosher
Dogs, and Big Dawgs) are directly related to its selling price,
and we can also see that the sale of Sodas (Grand Slam and
Regular) have no relation to its price.
•We can see that the sale of Kosher Dogs and Big Dawgs rose,
due to the decrease in pricing. We can also see that the sale of
Friar Franks decreased, due to its increase in pricing.
•In turn, the sale of Sodas (Grand Slam and Regular Sodas)
went down, as they are directly related to the sale of Friar
Franks (Our #1 Selling Item as of 7-29-12).

27. Price Elasticity of Demand Solutions
•As we can see that the sale of drinks are directly
related to our Friar Frank sales, and our sales
have decreased since the price increase to Friar
Franks.
•They have affected the sale of Sodas, which are
on a downward trend.
•A decrease of $0.25 could potentially increase
the sale of Friar Franks by 58,104 YTD, next
season.

28. 279,493 Friar Franks sold
YTD (7-29-11) in 2011.
163,285 Friar Franks sold
YTD (7-29-12) in 2012.
This area represents the area where we may
consider lowering the price of Hot Dogs by $0.25.
This would increase Items Sold by 58,104, and our
Total Revenue by $246,942.
$1,117,960 Total Revenue
Earned YTD (7-29-11) in
2011.
$733,862.25 Total Revenue Earned
YTD (7-29-12) in 2012.
This area represents the area of consumer surplus. Since
customers are currently used to spending the extra $0.25, we
should increase our 22 oz soda by $0.25.

29. Consumer Surplus
•The price reduction of $0.25 in our Friar Frank,
which would take it from $4.50 to $4.25, could
potentially take our current YTD Sales (7-29-12)
163,285 (Item Sales) and increase them by 58,104.
•This could potentially raise our revenue for next
season $246,942.
•Since customers have proven they are already
willing to spend the extra $0.25, there is no reason
why we should not expect them to pay the $0.25
somewhere else.

30. Drinks to Hot Dogs (Items)
Year Drinks Hot Dogs Drink %
Drink to Hot Dog
Ratio
2006 443,251 416,514 106.42% 1 : .94
2007 439,633 473,156 92.92% 1 : 1.08
2008 426,808 554,926 76.91% 1 : 1.30
2009 450,390 461,674 97.56% 1 : 1.03
2010 297,850 294,822 101.03% 1 : .99
2011 260,101 266,032 97.77% 1 : 1.02
2012 197,470 163,285 120.94% 1 : .79

31. Price Decrease/Increase
•A price reduction of $0.25 in our Friar Frank
can be reassigned to our Regular Soda.
•We can raise the price of our Regular Soda to
$4.25, and decrease our Friar Frank to $4.25.
•Which we could easily market, and our sales
could increase exponentially.

32. Regular Sodas to Friar Franks
Year Regular Soda Friar Frank
Soda to Friar
Frank %
Soda to Friar
Frank Ratio
2011 284,592 279,493 101.82% 1 : .98
2012 103,546 163,285 63.41% 1 : 1.37
Total 388,138 442,772 87.67% 1 : 1.12

33. Price Realignment Sales
•If we take into account the price reduction on
Friar Franks of $0.25 and the price increase of
$0.25 in Regular sodas –
–We can estimate that Friar Franks will increase by
58,104 items, and Regular Sodas by 90,523.

•284,592 (Regular Sodas 2011) – 103,546 (Regular Sodas 2012) = 181,046/2 = 90,523
–A total increase of 148,627 items sold.

•148,627 (Items Sold) x $4.25 = $631,664.75 Total Revenue

34. Statement of Findings
•The numbers show an increase of sales in the
Kosher Dog and the Big Dawg.
•The increase in price on the Friar Frank has
depleted sales of this item in comparison from
2011 vs. 2012.
•A price reduction could increase sales, and would
represent an incremental rise in revenue.
•As the sale of Sodas is directly related to the sale of
Hot Dogs, we may benefit exponentially from this
price rearrangement.