Question

Pizza Express offers large pepperoni pizzas for $5 on Tuesdays from 5:00 to 9:00 in the evening. Three cooks are on duty during that time. The fixed cost for the four-hour period is $100. The variable cost is $2 per pizza.

1. If it takes 10 minutes to prepare each pizza, work efficiency is approximately 95%, and employees get a 10-minute break each hour, what is the utilization of this process and how many pepperoni pizzas can Pizza Express produce during its four-hour special? (1 mark)
2. Assuming all pizzas produced can be sold, is the promotion worth the effort (i.e. is the promotion profitable)? (The answer requires a calculation). (1 mark)

Answer 1

how many pepperoni pizzas can Pizza Express produce during its four‐hour special?

During 4 hours or 240 minutes, employees would take 3 breaks of 10 minutes each.

Hence, time available for preparing pizza= 240-30= 210 miinutes.

It takes 10 minutes to make a pizza, hence 210/10= 21 pizzas can be made provided worker efficiency is 100%.

Hence, no. of pizzas that can be made at approximately 95% efficiency (21*95)/100 19.95 20

Since there are 3 cooks on duty, hence total no. of pizza prepared= 20*3= 60 Pizzas

Assuming all pizzas produced can be sold, is the promotion worth the effort?

Fixed cost (for the duration of 4 hours)= $ 100

Variable cost per pizza= $ 2

Hence, total cost (4 hours)= fixed cost+ variable cost= 100 + 60*2= $ 220

Total income(4 hours)= price per pizza* no. of pizzas sold= 5*60= $ 300

Since total income is more than total cost, promotion is worth effort becaue it will earn profit.