THREE years ago, Derek Jeter (he had changed his name to emulate his idol) completed his degree in accounting. The economy was in a depressed state at that time, and Derek managed to get an offer of only $30,000 per year as a bookkeeper. In addition to its relatively low pay, this job had limited advancement potential. Since Derek was an enterprising and ambitious young man, he declined this offer and started a business of his own. He was convinced that because of changing lifestyles, a drive-through coffee establishment would be profitable. He was able to obtain backing from his parents to open such an establishment close to the industrial park area in town. Derek named his business The Cappuccino Express and he decided to sell only two types of products: espresso drinks and brewed coffee both of which would be available caffeinated or decaffeinated.
As Derek had expected, The Cappuccino Express was very well received. Within three years, Derek had added another outlet north of town. He left the day-to-day management of each site to a manager and focused his own attention on overseeing the entire enterprise. He also hired an assistant to do the record keeping and selected other chores.
1. What factors can be expected to have a major impact on the success of The Cappuccino Express? 2. What major tasks does Derek have to undertake in managing The Cappuccino Express? 3. What are the major costs of operating The Cappuccino Express? 4. Derek would like to monitor the performance of each site manager. What measure, or measures, of performance should he use? 5. If you had suggested more than one measure, which of these should Derek select if he could use only one? 6. Suppose that last year, the original site had yielded total revenues of $146,000, total costs of $120,000, hence a profit of $26,000. Derek had judged
