Luigi’s is a popular Italian restaurant in Los

Luigi’s is a popular Italian restaurant in Los Angeles

Luigi’s is a popular Italian restaurant in Los Angeles. It is open from 4 pm to mid-night (an 8 hour shift) for 365 days a year. Currently, it employs 5 servers and 2 chefs. Luigi, the owner, believes that business is good but it could be improved by better operational planning. He has received several customer complaints regarding long waiting times. However, he does not know how this affects his profitability. He hires a management consultant firm, C & B to address this problem. The analysts at C & B observe the arrival of customers at Luigi’s on a typical day and also ask some of the waiting customers simple questions about their opinion of the level of service. Based on this they conclude that the average number of customers at Luigi’s depends on the average waiting time of each customer as follows:

WRITE THIS ESSAY FOR ME

Tell us about your assignment and we will find the best writer for your paper.

Get Help Now!

C = 500 – 10 * T customers

Where C is the average number of customers in a single 8-hour day and T is the average waiting time over the entire day.(1)
Based on their experience with similar restaurants, they know that the average waiting time of a customer depends on labor as follows:

T= 60/xs+30/xc minutes.
Here, xs is the number of servers at the restaurant in a single day (there is only one shift) and xc is the number of chefs(2). While service will improve with increase in the number of servers and chefs, Luigi explains that they come at a cost: each server gets paid $96 a day while each chef has a salary of $160 a day. Luigi maintains that these rates are difficult to negotiate down as the restaurant has a reputation to maintain in the face of tough competition and needs the best people. The material cost required for each customer’s selection is about $4 while the typical meal price per customer is about $12 with the current menu and normal customer preferences. In addition, Luigi incurs expenses of $500 per month for operating costs such as electricity. The net value of the restaurant’s assets is estimated to be about $300,000.
C & B would like to analyze the specific metrics for Luigi’s defined below:

Return on Assets(ROA) = Profits /Assets

Total Factor Productivity (TFP) = Outputs / Inputs = Revenue / Cost

Assume that you are an associate at C & B. Your tasks are as follows:

1) Make a spreadsheet to calculate annual ROA and TFP(3). What are the ROA and 
TFP values with current operations?

2) Suppose you keep the number of servers constant at 5 and optimally adjust the 
number of chefs for maximum profit. Draw a graph of ROA(4)  versus the number of chefs and hence find the optimal number of chefs.

3) Suppose you keep the number of chefs constant at 2 and optimally adjust the number of servers for maximum profit. Draw a graph of ROA versus the number of servers and hence find the optimal number of servers.

4) Find the combination of chefs/servers that a) maximizes ROA, b) maximizes TFP.

Key note

(1) The restaurant loses 10 customers for every extra minute of waiting time. This is because these customers balk and choose to go elsewhere. The number of customers has an upper limit and cannot exceed 500 on any given day.

(2)  This relationship is intuitive since an infinite number of chefs and servers gives a waiting time of zero while either zero chefs or zero servers will make the customers wait forever.

(3) Do not use “assets” in the productivity calculation

(4) Assume that changes in the number of servers or chefs do not affect the assets. For example, increasing the number of chefs might necessitate an increase in the number of stoves. In the current problem, there is enough capacity to accommodate manpower increases.

Not ready? We are here to write this paper from scratch.
Place an order for this assignment or any other paper with us. We guarantee that the paper will be delivered within the specified deadline. We also have a personalized customer support and you will be able to communicate with your writer throughout the order preparation process. Thank you for choosing us.