BOB’S SERVICE STATION AND DINER “Sylvia, we have been operatingthis service station and diner for many years. Lately, I have thefeeling that my income has declined. I think that there areopportunities out there that I have not taken advantage of. I wantto pass this business on to my sons and am not comfortable with ourcurrent position and strategy.” The words above, spoken to Sylvia,the primary accountant for Bob’s, reveal a number of concerns Bobhas concerning his operation. Bob’s Service Station and Diner(Bob’s) is an independently owned service station and restaurant ona major interstate highway. Bob has been in operation for over adecade and customers have liked to frequent his business. Oftenthey choose their routes to stop at places like his with low fuelprices and to enjoy food like the juicy burgers and good food Bob’sprovides. He has a great reputation with his customers, especiallytruckers, and enjoys their business. Bob has noticed, however, thatwhen busiest with truckers, fewer families stop by. Bob has made apretty good living running the place. However, even though hisincome continues to seem satisfactory, it does not seem to buy asmuch as before. This perception, as well as the maturity of hissons, Jason and Bob Jr., has heightened Bob’s concern over thefuture of his operation. Bob wants to know what he can do to makethis a more profitable business and pass on a more effectiveoperation to his sons. Bob knows that his operation attracts manycommercial truckers. However, he is also popular with familiesstopping to use the facilities and eat in the restaurant afterfilling up the family vehicle on vacations. Over the past decadeBob’s typical markup on diesel is about 1 cent and on gasoline isabout 1.5 cents. This fuel pricing follows the typical process inthis business of taking the delivery price and marking it upbetween 1 and 5 cents per gallon. Bob has also noticed an ebb andflow by season – summer and winter being highest and spring andfall being lower. (Winter is December, January, February. Summer isJune, July and August.) Bob knows that he has some control overfuel prices and can alter the prices of his typical meal. Thedilemma he faces is to know in what direction he should change themor whether or not he should modify his pricing practice at all.Also, he does not know what other activities or attractions hecould add that might increase his profits. If he raises prices, heknows that he will reduce sales. At lower prices, he will sell morebut incur greater costs. Bob is getting ready to step back from hisbusiness and turn the operation over to his sons. Before he doesthat, he wants to be comfortable in leaving his sons with awell-defined pricing strategy, based upon data. Following up on theexpression of Bob’s future concerns, Sylvia, his accountant, hasgathered a substantial amount of information regarding his firm’sperformance over the past decade. This data is available in anExcel file on the course web site.

QUESTION: Use simple regression to estimate the marginal profitcontribution from fuel sales. Use it again to estimate the marginalprofit contribution from food sales. Compare and interpret yourestimates.

Please find DATA here:

https://www.csun.edu/~ba44982/BUS302%20-%20Spring%202020/Case5/Bob's%20Service%20Station%20and%20Diner%20-%20Student%20Data%20Spreadsheet%20-%20rev%201.xlsx