Holt's Pizza Ltd. is a new company about to initiate franchising agreements. Management of the company...

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Holt's Pizza Ltd. is a new company about to initiate franchising agreements. Management of the company is currently studying various alternatives regarding the pizza outlet franchises. The only available data was formulated by a hired consultant who left recently for a position in Ontario. A summary of the information that the consultant was able to develop follows: Average selling price per pizza $7.50 Current and expected tax rate 40% I Cost of pizzas sold Manager's salary Wages Rent Utilities Insurance Total cost Normal Monthly Costs* 200 Variable $2,000 + Fixed 500 300 1,000 $5,500 2,200 1,500 $7.200 $6,000 *Costs estimates are based on 2000 pizzas (but good for a relevant range of up to 8000 pizzas a month). The above information represents estimates for the operation of a pizza outlet franchise. Since $6,000 * Costs estimates are based on 2000 pizzas (but good for a relevant range of up to 8000 pizzas a month). The above information represents estimates for the operation of a pizza outlet franchise. Since management is interested in marketing the franchises as soon as possible, it has asked you to comment on various points and alternatives. Required: (Treat each case independently. Use the original data unless otherwise stated) Using the above information, determine the break-even point for a pizza outlet franchise i n terms of both sales dollars and the number of pizzas sold each month (4 marks) a. I b. As a promotion to attract business, management is considering whether to offer a special price during the first month of operations which, in effect, would reduce the average selling price to $5 per pizza. How many pizzas will have to be sold by a pizza outlet franchise at the promotional selling price to earn a net income of $1,500 during the first month? (2 marks) C. d. I (Refer to the original data). Originally, management planned to set the business hours for each pizza outlet franchise at 11:00 A.M. to 2:00 A.M. (that is 15 hours per day), seven days per week. Management is now considering a decrease in business hours by opening each outlet five hours later at 4:00 PM. With these hours, management feels it would save an average of $1,000 per month. The average number of pizzas sold between 11:00 A.M. and 4:00 PM was estimated to be 15 per day (assume a 30-day month). Should management change the business hours? Support your answer. marks) (2 (Refer to the original data). The president has decided that the company may have to raise the selling price on the pizza to cover an expected $0.50 increase in the variable costs per pizza in 2021. If the company wants to maintain the same Contribution Margin Ratio as in 2018, what selling price per skateboard must it charge in 2019 to cover the increased variable costs? (1 mark) Holt's Pizza Ltd. is a new company about to initiate franchising agreements. Management of the company is currently studying various alternatives regarding the pizza outlet franchises. The only available data was formulated by a hired consultant who left recently for a position in Ontario. A summary of the information that the consultant was able to develop follows: Average selling price per pizza $7.50 Current and expected tax rate 40% I Cost of pizzas sold Manager's salary Wages Rent Utilities Insurance Total cost Normal Monthly Costs* 200 Variable $2,000 + Fixed 500 300 1,000 $5,500 2,200 1,500 $7.200 $6,000 *Costs estimates are based on 2000 pizzas (but good for a relevant range of up to 8000 pizzas a month). The above information represents estimates for the operation of a pizza outlet franchise. Since $6,000 * Costs estimates are based on 2000 pizzas (but good for a relevant range of up to 8000 pizzas a month). The above information represents estimates for the operation of a pizza outlet franchise. Since management is interested in marketing the franchises as soon as possible, it has asked you to comment on various points and alternatives. Required: (Treat each case independently. Use the original data unless otherwise stated) Using the above information, determine the break-even point for a pizza outlet franchise i n terms of both sales dollars and the number of pizzas sold each month (4 marks) a. I b. As a promotion to attract business, management is considering whether to offer a special price during the first month of operations which, in effect, would reduce the average selling price to $5 per pizza. How many pizzas will have to be sold by a pizza outlet franchise at the promotional selling price to earn a net income of $1,500 during the first month? (2 marks) C. d. I (Refer to the original data). Originally, management planned to set the business hours for each pizza outlet franchise at 11:00 A.M. to 2:00 A.M. (that is 15 hours per day), seven days per week. Management is now considering a decrease in business hours by opening each outlet five hours later at 4:00 PM. With these hours, management feels it would save an average of $1,000 per month. The average number of pizzas sold between 11:00 A.M. and 4:00 PM was estimated to be 15 per day (assume a 30-day month). Should management change the business hours? Support your answer. marks) (2 (Refer to the original data). The president has decided that the company may have to raise the selling price on the pizza to cover an expected $0.50 increase in the variable costs per pizza in 2021. If the company wants to maintain the same Contribution Margin Ratio as in 2018, what selling price per skateboard must it charge in 2019 to cover the increased variable costs? (1 mark)

Answer rating: 100% (QA)

aBreakeven point in sales dollars Fixed costs 1 Margin Breakeven point 6000 1 040 10000 Breakeven point in number of pizzas sold Fixed costs Contribut... View the full answer