Part B Your friend wants to position the restaurant in the family-value segment
ID: 2589513 • Letter: P
Question
Part B Your friend wants to position the restaurant in the family-value segment because she sees an unmet need for healthy pizza. Her pizzeria will be different from pizza chains because she plans to use organic, fresh ingredients, and good quality cheese. She will cook the pizza in a traditional way, too. She estimated that the unit cost will be: Cheese $1.00, dough S0.25, sauce $0.35, other ingredients $0.40. Since she is targeting the family-value market, she wants to be healthy and affordable. She wants to sell at an average price of $7.00 per pizza She wants to lease a location in a commercial area. The location is 2,700 SF, $15.00 SF/year. She plans to be the restaurant manager and get $30,000 a year. She will hire 3 full-time employees at $12.00 hr. Overhead including equipment credit payments, electricity, gas, etc. will be about $20,000 and promotions/advertising will be about $12,000 3) What's the BEP in units and dollars? 4-5) Estimate an income statement for the estimated demand found in Part la 6) Will she breakeven in year 1? 7) What is the expected profit/loss for year 1? 8) If you were the financial officer, would you give her the loan? 9-10) What can you recommend your friend to increase profitability? Justify your answer (show how much profit she would generate with your idea)Explanation / Answer
Remaining questions could not be answered as the full question is not provided to us.
Particulars Selling price per unit $ 7.00 Less:Variable Costs Cheese $ 1.00 Dough $ 0.25 Sauce $ 0.35 Other Ingredients $ 0.40 Total Variable Cost $ 2.00 Contribution per unit $ 5.00 Less: Fixed Costs Lease rent $ 40,500.00 Restaurant Manager's Salary $ 30,000.00 Gas, Electricity &OH $ 20,000.00 Advertising $ 12,000.00 Fulltime employees'salary $ 86,400.00 Assumed 3 employees work for 8 hrs a day for 300 days in a year Total Fixed Cost $ 188,900.00 3) BEP Units per annum shall be = Fixed Costs/Contribution per unit BEP Units: 37780 BEP In $ $ 264,460 BEP in $ = BEP in Units * Selling price