Question

Cost-Volume-Profit Analysis for a Start-up Business In-class, your instructor will break you into small groups. In each group, you will think of a proposed business (e.g., restaurant, retailer, electronics, software provider, etc.) and develop some initial ideas about what considerations need to be taken into account for the company to reach profitability. Answer the following questions in your groups: Describe your business. What product or service will your provide? What will your high- level strategy be - to focus on cost/efficiency or to provide high value? How much will your charge for your product, and what factors do you have to consider for setting the sales price? What would be the variable costs you would have to consider for your business? What would the fixed costs you would have to consider for your business?...

Answer 1

Business = Fast food restaurant

Product = Burger, Pizza, fries and Soft drinks.

Services =Dine-in services, Take away and Party Caterings

Strategy = We will consider buying beef for patty from farmers directly to avoid paying premium to middlemen. Also other ingredients like cheeze, vegetables etc can be procured from farmers.

Sales Price = we will sell our products at below prices:-

Burger = $8

Pizza = $8

Fries =$1

Softdrinks = $1

Total meal would cost the customer $10 for main course. We have considered various factors to reach at our saales price. Main factors are as below:-

Competitor = Pizza and burger price in market is at $10 - $12, we have benchmarked our price at 80% of competitor price.

Customer purchase power = Our restaurant is in market near the college, majority of the customer would be college students and we have considered our price keeping in mind their purchasing power.

High Volume = Since our product would be at cheaper rate than market but our quality and taste is the best. We are considering high volume of customer to achieve our profitability.

Variable Costs = our variable costs would include raw materials cost, employee salary advertisement and marketing cost.

Fixed Costs = Our Fixed costs would include Restaurant rent, Management salary, utilities, insurance etc.