Understanding HP Showroom Profitability in 2020

The question asks us to determine which HP Showroom had the highest profitability per outlet in the year 2020. The profitability per outlet is defined as the ratio of the average profit per outlet to the average sales per outlet.

Analyzing the Provided Data Table

We are given a table showing the number of outlets, average sales per outlet, and total profit for six HP-showrooms (A to F) for the years 2020 and 2021.

Calculating Profitability Per Outlet for 2020

To find the profitability per outlet for each showroom in 2020, we first need the average profit per outlet. The average profit per outlet is calculated by dividing the total profit of all outlets by the number of outlets. Then, we divide this average profit per outlet by the average sales per outlet (which is already given in the table).

The formula is:

\( \text{Average Profit per Outlet} = \frac{\text{Total Profit}}{\text{Number of Outlets}} \)

\( \text{Profitability per Outlet} = \frac{\text{Average Profit per Outlet}}{\text{Average Sales per Outlet}} \)

Let's calculate this for each showroom (A-F) for the year 2020:

• Showroom A (2020):
  • Number of Outlets = 2
  • Average Sales per Outlet = 100
  • Total Profit = 80
  • Average Profit per Outlet = \( \frac{80}{2} = 40 \)
  • Profitability per Outlet = \( \frac{40}{100} = 0.40 \)
• Showroom B (2020):
  • Number of Outlets = 4
  • Average Sales per Outlet = 340
  • Total Profit = 250
  • Average Profit per Outlet = \( \frac{250}{4} = 62.5 \)
  • Profitability per Outlet = \( \frac{62.5}{340} \approx 0.1838 \)
• Showroom C (2020):
  • Number of Outlets = 1
  • Average Sales per Outlet = 120
  • Total Profit = 80
  • Average Profit per Outlet = \( \frac{80}{1} = 80 \)
  • Profitability per Outlet = \( \frac{80}{120} \approx 0.6667 \)
• Showroom D (2020):
  • Number of Outlets = 5
  • Average Sales per Outlet = 180
  • Total Profit = 240
  • Average Profit per Outlet = \( \frac{240}{5} = 48 \)
  • Profitability per Outlet = \( \frac{48}{180} \approx 0.2667 \)
• Showroom E (2020):
  • Number of Outlets = 3
  • Average Sales per Outlet = 360
  • Total Profit = 300
  • Average Profit per Outlet = \( \frac{300}{3} = 100 \)
  • Profitability per Outlet = \( \frac{100}{360} \approx 0.2778 \)
• Showroom F (2020):
  • Number of Outlets = 5
  • Average Sales per Outlet = 80
  • Total Profit = 30
  • Average Profit per Outlet = \( \frac{30}{5} = 6 \)
  • Profitability per Outlet = \( \frac{6}{80} = 0.075 \)

Comparing 2020 Profitability per Outlet Values

Let's list the calculated profitability per outlet values for each showroom in 2020:

• Showroom A: 0.40
• Showroom B: ≈ 0.1838
• Showroom C: ≈ 0.6667
• Showroom D: ≈ 0.2667
• Showroom E: ≈ 0.2778
• Showroom F: 0.075

Comparing these values, we can see that Showroom C has the highest profitability per outlet in 2020.

Conclusion on 2020 Showroom Performance

Based on our calculations, the HP-Showroom with the highest profitability per outlet in 2020 was Showroom C, with a value of approximately 0.6667.

Revision Table: Key Metrics 2020

Additional Information: Profitability Analysis

Profitability per outlet is a useful metric for comparing the efficiency of different business units or outlets, especially when they have varying scales of operation (different numbers of outlets or sales volumes). It standardizes the profit generated relative to the sales generated by each outlet on average. A higher profitability per outlet indicates that for every rupee of sales generated by an average outlet, a larger proportion is converted into profit, signifying better operational efficiency or pricing strategies at the outlet level.

Understanding metrics like average sales, average profit, and profitability helps businesses evaluate performance, identify high-performing and underperforming outlets, and make informed decisions about resource allocation, expansion, or improvement strategies.