Question

Natalie's Nail Salon has 2 locations: Natalie's Downtown, and Natalie's By-the-Beach. The two salons combined performed 320 pedicures in the first quarter of 2011, and 400 pedicures in the second quarter. Pedicures cost $8.50 at both locations in Q1 and Q2. Natalie notices that in Q1, 30% of pedicures are performed at By-the-Beach but in Q2, 55% of the total were performed there. Natalie's sales goals for Quarter 3 are 6% growth in each location compared to Quarter 2. Natalie is considering raising pedicures prices to $11 at both locations in Q3 to increase revenue.

a) What was the overall pedicure growth rate from Q1 to Q2?

b) Assuming quarterly growth remains constant, what would be the annual growth rate?

c) What was the quarterly growth rate for pedicures at the By-the-Beach location?

d) How many pedicures must be performed at By-the-Beach in Quarter 3 to achieve the growth goal?

Answer 1

(a) Q1 Pedicures = 320 and Q2 Pedicures = 400

Growth Rate = ((400-320) / 320) x 100 = 25 %

(b) Q1 Pedicures = 320 and Expected Quarterly Growth Rate = 25 %

Therefore, Q4 Pedicures = 320 x (1.25) x (1.25) x (1.25) = 625

Overall Annual Growth Rate = ((625 - 320) / 320) x 100 = 95.3125 % ~ 95.31 %

(c) Q1: 30 % pedicures performed by By the Beach, Number of Pedicures performed by them in Q1 = 0.3 x 320 = 96 and Q2: 55% of pedicures performced by them, Q2 Pedicures = 0.55 x 400 = 220

Growth Rate = ((220 - 96) / 96) x 100 = 129.167 %

(d) Targeted Growth in each location = 6 % compared to Q2

Therefore, Q3 Target = Q2 Value x 1.06 = 220 x 1.06 = 233.2 ~ 233