A large pizza sells for $12. Materials for a large pizza cost $3.00. Labor is considered a
Question:
A large pizza sells for $12.
Materials for a large pizza cost $3.00.
Labor is considered a “fixed cost” – along with rent, utilities, insurance, etc.
Owner’s Pizza Shops wants to increase revenues. he plans to offer a $4 discount coupon for a $12 pizza. That’s a net $8.00.
He also plans to spend roughly $1,000 a month on EDDM coupon mailings – for immediate areas around his 3 pizza shops.
Those coupons will have an expiration date of two weeks after they are dropped at their carrier routes.
Postcard mailing cost is $0.191/pieces per 1000
Coupon printing cost is $.05/ pieces per 1000
Break-Even Point (BEP) = Total Additional Promotion Cost / (Net Selling Price - Cost of Additional Materials)
Questions:
1. Which EDDM carrier routes are you choosing, with how many coupons drops – once a month…? (Note: Coupon printing cost is $.05) Remember, you only have a $1,000 budget to spend – on your initial test EDDM mailing and printing.
2. If your net revenue per coupon redeemed for a pizza is $8.00 (note: printing costs are part of your promotion cost, not pizza cost),
how many coupons need to be delivered?
how many pizzas need to be sold to “Break Even” – if your coupon redemption rate is 5%?”
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts