ooOO T-Mobile LTE 7:07 AM blackboardlearn.utep.edu Part A A friend of yours want

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ooOO T-Mobile LTE 7:07 AM blackboardlearn.utep.edu Part A A friend of yours wants to open a Pizzeria. She does not have all the money to start up, however, she knows that there are commercial loans and federal grants to incentivize small entrepreneurs Banks and federal agencies request loan applicants to submit a formal business plan. The marketing section of the business plan asks for an assessment of expected sales for the first year (expected demand). Based on the sales forecast, cash flows and financial statements will be generated Your friend knows you are taking a marketing class, so he comes to you for help. The first step is to check the current demand for pizza in the area and the competition. To do so, you go to the UTEP library and look up consumer spending for 2015 in Demographics Now. The results are 30,000 Number of families in the market- Average number of pizzas per family per year Average price S10 Estimate 1) Total annual market demand in units and dollars Given your initial capacity, you expect to capture 5% of the market share. So: 2) Estimate annual company demand in units and dollars

Explanation / Answer

Estimated market demand in dollars = 180000 units x $10 = $1800000

Estimated company demand in dollars = 9000 units x $10 = $90000

Fixed cost:

Rent 2700 square feet x $15.00 per square feet = $40500

Fixed Overhead $20000

Sales & promotions $12000

Assuming, 3 employees working for 9 hours each and every day working 6 days in a week and the year consists of 48 weeks, total salary can be: 9 hrs. x 3 persons x 6 days x 48 weeks x $12 = $93312

Salary $93312

Total fixed cost: $165812

BEP (Units): $165812 / $5 = 33160 units yearly (approx.)

BEP (dollars) 33160 x $7.00 = $232120

Sales price 7 Less: Variable Cost Cheese 1 Dough 0.25 Sauce 0.35 Others 0.4 Total VC 2 Contribution 5

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