Question

THE PIZZA STAND

A student organization has been given permission to operate a pizza stand during the upcoming homecoming weekend. The stand will be located just outside the football stadium, making it accessible during the ball game. The location is also convenient for visitors as they tour the campus at other times during the weekend. An estimated 5,500 visitors will be on campus, in addition to the campus population of 2,500.

Each pizza requires:

1/2 lb. pizza flour

4 oz. pizza sauce

1/8 lb. Pepperoni

1/2 lb. Cheese

Pizza flour costs $8.00 per 10-lb. bag; pizza sauce, $4.80 per 64-oz. jar; pepperoni, $18.00 per 5-lb. package; and cheese, $15.00 per 5-lb. package. Club members will cook the pizzas and staff the stand on a volunteer basis. The university requires each vendor to pay a $50.00 permit fee on the building. You also need to purchase a canopy for $200, a small oven for $200 and other supplies for $50. Your club plans to donate the profits from the pizza sales to a local children’s hospital.

1. How many pizzas can you anticipate selling assuming that 20% of the attendees will buy a pizza?

2. How much of each raw material do you need to buy?

3. Calculate your Cost of Goods per pizza (COGS)

4. Anticipate selling each pizza for $7.00.   

a. Create and show a basic Income Statement/P & L(Properly formatted).

b. CALCULATE YOUR NET PROFIT MARGIN as a percentage?

5. Calculate your Break- Even point based on your expenses required for the event? Be sure to write the formula

Answer 1

1) total people = 5500+2500 = 8000

20% to buy 1/pizza, so, pizzas sold = 8000*20/100 = 1600 pizzas

2) raw material for each

flour = 1600 * (1/2) / 10 = 80 bags

sauce = 1600 * 4 / 64 = 100 jars

pepper = 1600 * (1/8) / 5 = 40 packs

cheese = 1600* (1/2) /5 = 160 packs

3) COGS per pizza = (1/2)*(8/10) + 4*(4.8/64) + (1/8)*(18/5) + (1/2)*(15/5) = 2.65$

4)

a) Fixed Cost = 50+200+200+50 = 500$

COGS = 1600*2.65 = 4240$

sales = 1600*7 = 11200$

profit = 11200 - 4240 = 6960$

b) net profit = 6960 / 11200 = 62%

5) let x be the breakeven sales

expenses = 500 + 2.65*x

revenue = 7*x

for breakeven, expenses = revenue

500+2.65x = 7*x

x = 115 pizzas

breakeven is at sale of 115 pizzas.