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Case Study 1: Pricing and Profitability Analysis for a Pune Tea Shop
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Business Background
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A small tea shop located near an office area in Pune sells three main products:
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Cutting Chai
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Masala Chai
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Coffee
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The owner feels that daily sales are reasonable, but overall profit is lower than expected.
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He wants to understand:
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Which product contributes the most to the business, whether the shop is actually profitable, and whether increasing the price of Cutting Chai can improve profitability without hurting demand too much.
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Business Problem
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The owner currently prices Cutting Chai at ₹15.
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He is considering increasing the price but is worried that customers may reduce purchases if the price becomes too high.
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The business therefore needs to answer three questions:
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1. Which product contributes the most profit to the shop?
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2. Is the shop profitable after fixed daily expenses?
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3. What should be the optimal price for Cutting Chai based on customer response?
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Available Data
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Product Data
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ItemUnits SoldSelling PriceCost per Item
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Cutting Chai100₹ 15₹ 8
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Masala Chai60₹ 25₹ 12
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Coffee30₹ 35₹ 18
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Daily Fixed Expenses
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ExpenseDaily Cost
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Rent allocation₹ 500
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Staff salary allocation₹ 700
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Electricity and gas₹ 200
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Total Fixed Cost₹ 1,400
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