Analysis of SOS and Sales | 1

Company A-Z: Analysis of SOS and Sales

DeVry University/Keller Graduate School of Management

GM533 Applied Managerial Statistics Professor Francis Toal February 6, 2010

Analysis of SOS and Sales | 2

Executive Summary Data was collected over a 12-month period from nine different stores, where seven stores provided both counter and drive thru services and two stores only had counter services. The data was collected in order to test two current assumptions. The first assumption is that the speed of service (SOS) of the drive thru is less than the SOS of the counter. The null hypothesis stated that the mean SOS of drive thru is greater than or equal to the SOS of counter. The alternative hypothesis stated that the drive thru SOS is less than the SOS of the counter. A 95% confidence level was chosen. A two-sample hypotheses test was done and it failed to reject the null hypothesis, which is that the drive thru SOS times is greater than or equal to the counter SOS. The second assumption is that the SOS of the counter and drive thru has a direct impact on sales. A regression test was conducted to evaluate the correlation between the SOS and the amount of sales dollars generate. A 95% confidence level was chosen. The analysis proves that there is a weak correlation between the SOS at the drive thru and sales. The recommendation is that other factors may have a higher impact on sales than SOS and these factors should be explored further.

Analysis of SOS and Sales | 3

Introduction
The Company A-Z has nine stores in its Northwest division. A-Z has collected data on the sales and speed of service (SOS) for both the front counter and the drive through. In the data set, collected two stores do not have a drive through. Company A-Z would like to determine if our current assumption regarding the effects of the SOS of the counter and drive thru have on sales. The current assumption is that the lower the SOS times of the counter and drives thru the higher the sales. We will do a regression test to determine if there is a correlation between SOS and sales. In addition, the current assumption regarding the SOS is that the SOS of the drive through would be faster than the front counter. We will test these through two-sample hypothesis test. Sales: The below histogram (Figure 1) shows the mean sales of all stores are clustered around $90,000. In addition, the data is screwed to the right with sales in the $240,000. The two stores without a drive through service only managed to average about $40,000. The stores with drive thru have average sales of $94,000. It appears that the stores with a drive thru averages $50,000 more in sales than stores without a drive true. Store A averaged $144,801 in sales over 12 periods. The sales data for five of the stores ranged between $20-$30,000 and three stores between $10-20,000. Additionally Store A is considered a store with an extreme range of $242,760. This is due to the sales variance between period 2 and 3. The standard deviations for most sales centers are between $5,000 to $8,000 with again, two outliers in the $3,000 area and the one extreme with a $52,878 deviation.

Analysis of SOS and Sales | 4

Figure 1:

Histogram of all Sales over the 12 periods for 2009

35 30 25 Percent 20 15 10 5 0

Sales

SOS Counter and Drive Through: As illustrated in figure 2, the mean counter SOS averages 121 seconds for all the stores over the 12 periods. The median for the same time-period shows 125.5 seconds, which indicates a slight skew towards the slower speed of service. The range for five of the stores is in the 20 and 30 seconds range. There is one store with the range of 16 seconds and three stores ranges are between 47 to 72 seconds. The counter SOS standard deviation varies between 5 to 18 seconds amongst all the stores. There are currently two stores without a drive though. As illustrated in figure 3, the SOS of drive through for five of the stores is between 17 to 28 seconds range. There is one store with the range of 13 seconds and one store ranges within 33 seconds.

Analysis of SOS and Sales | 5

Figure 2:

Histogram of all Counter SOS over the 12 periods for 2009 25 20 15 10 5 0

Percent

SOS Counter

Figure 3:

Histogram of all Drive Thru SOS over the 12 periods for 2009 20 18 16 14 Percent 12 10 8 6 4 2 0

SOS Drive Thru

Analysis of SOS and Sales | 6

Overall:

Over the 12 periods, there is a central tendency where the chain mean of sales averaged $82,234 with a counter SOS mean of 121 seconds while the drive through SOS mean was 144.3 seconds; the median equals $82,680 with a median counter SOS of 130 seconds and a drive thru median of 146. The difference between the mean and the median suggests some asymmetry in the distribution toward the high end.

Our dispersion range from 8 stores and 12 periods of data gives us the standard deviation of $15,761 in sales, but this seems to be slighted high by one store, and an SOS deviation for 4.2 seconds at the counter and 2.2 in the Drive Thru. Since the data appear roughly normal in shape, we expect to have the mean within the standard deviations to include approximately 95% of the values. The shape of the distribution appears roughly normal, with a hump at about the mean and tapering into the tails.

Two- Sample Test of SOS Drive Thru and Counter: The companys current assumption is that the drive thru SOS is less than the counter SOS. The SOS data passed the F-test since the p-value is low (0.0104), which means the data is normal. The p-value for the two-hypothesis test is 1.00, which is high. This means we failed to reject the null hypothesis, which is that the drive thru SOS times is greater than or equal to the counter SOS.

Analysis of SOS and Sales | 7

Hypothesis:

Null Hypothesis (Ho): SOSdt => SOSc Alternate Hypothesis (Ha): SOSdt < SOSc

Data:

Hypothesis Test: Independent Groups (t-test, pooled variance)

SOS Drive Thru 144.25 11.77 84 SOS Counter 124.95 15.64 84 166 19.298 191.612 13.842 2.136 0 9.03 1.0000 15.081 23.515 4.217 F-test for equality of variance 244.60 138.62 1.76 .0104 mean std. dev. n df difference (SOS Drive Thru - SOS Counter) pooled variance pooled std. dev. standard error of difference hypothesized difference t p-value (one-tailed, lower) confidence interval 95.% lower confidence interval 95.% upper margin of error

variance: SOS Counter variance: SOS Drive Thru F p-value

Analysis of SOS and Sales | 8

Regression Test:

A multiple regression analysis showed that the p-value for SOS counter is higher (.0915) than we expected to meet our 95% confidence level. This indicates that there is not enough correlation between the SOS of counter to sales in order to be included in our regression test. When the regression analysis was redone to include only the SOS of the drive thru the p-value for SOS was low (.0230) enough to meet our 95% confidence level indicating a correlation between the drive thru SOS and sales. The coefficient of determination is .061. This means that only 6.1% of the variation in sales can be explained by the change of SOS at the drive thru. Figure 4, the Normal Probability Plot of Residuals graph, suggests that the data may not have normal distribution. The analysis proves that there is a weak correlation between the SOS at the drive thru and sales. The recommendation is that other factors may have a higher impact on sales than SOS and these factors should be explored further.

Regression Analysis:
r r Std. Error 0.061 -0.248 29658.011 n k Dep. Var. 84 1 Sales

ANOVA table Source Regression Residual Total SS 4,724,042,203.4255 72,127,005,252.3302 76,851,047,455.7557 df 1 82 83 MS 4,724,042,203.4255 879,597,625.0284 F 5.37 p-value .0230

Analysis of SOS and Sales | 9

Regression output variables Intercept SOS Drive Thru coefficients 186,827.4188 -640.7659 std. error 40,015.2109 276.4933 t (df=82) 4.669 -2.317 p-value 1.17E-05 .0230

confidence interval 95% lower 107,224.4187 -1,190.7991 95% upper 266,430.4190 -90.7328

Figure 4:
Normal Probability Plot of Residuals 200,000.000 150,000.000 Residual 100,000.000 50,000.000 0.000 -50,000.000 -100,000.000 -3.0 -2.0 -1.0 0.0 Normal Score 1.0 2.0 3.0