Customer-Level Planning Circle K operates a number of convenience stores worldwide. Assume that an analysis of operating costs, customer sales, and customer patronage reveals the following:Fixed costs per store $80,000.00/year Variable cost ratio0.80
Average sale per customer visit$15.00
Average customer visits per week1.75
Customers as portion of city population 0.04
Determine the city population required for a single Circle K to earn an annual profit of $40,000

11,000 people

Explanation:

fixed costs per store $80,000

variable cost ratio 0.80

average sale per customer $15

average customer sales per week 1.75

customers as portion of population 4%

each customer shops 1.75 x 52 = 91 times per year

contribution margin per visit = $15 - ($15 x 0.8) = $3

contribution margin per client per year = $3 x 91 = $273

in order to make $40,000 in profits, you need at least:

($80,000 + $40,000) / $273 = 439.56 ≈ 440 customers

to determine the city's total population = 440 / 0.04 = 11,000

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