Question

Bob’s Pizza serves 2,000 customers per month. Each customer orders food and a beverage.

Revenues are $48 for food and $10 for beverages per customer. Variable costs are $16 for food and $2 per beverage per customer. Fixed costs are $50,000 monthly.

1. What is the monthly profit?

2. What is the customer breakeven each month?   

Bob’s customers are starting to use UberEats. Bob’s pays $12 to UberEats for each delivery and they only deliver food not beverages.

3.   If 10% of Bob’s customers start using UberEats, making it 1,800 customers in person and 200 UberEats customers. What will Bob’s profit each month be?

4.   $20,000 per month is the minimum profit that Bob’s wants to make to keep operating. They have 2,000 customers, split between in store and UberEats. What is the largest number of UberEats customers that they can have to keep operating?

Answer 1

Ans:

Customers : 2,000

Revenue per customer:

Food : $48

Beverages : $10

=$48 + $10 = $58

Costs per customer:

Food : $16

Beverages : $2

= $16 + $2 = $18

Fixed Costs : $50,000

1.

Profits : Number of customers * (Sales per unit - variable cost per unit ) - Fixed costs

= 2,000 ( $58 - $18) - $50,000= $30,000

2.

Break even customers:

:Fixed Costs/ Contribution margin per month

Contribution per unit : Sales - variable cost

= $58 - $18 = $40

Break Even : $50,000/$40 = 1,250 Customers

3.

If 10% customer uses Ubereats:

Sales for 1,800 customers : 1,800 * $58 = $104,400

Sales for 200 customers : 200 * $48 = $9,600 (No beverage sales)

Cost of 1,800 customers : 1,800 * $18 = $32,400

Cost of 200 Customes : 200 * ($16 + $12(extra delivery charges)) = 200 * $28 = $5,600

Fixed Costs : $50,000

Profits : Sales - variable costs - Fixed costs

= $104,400 + $9,600 - $32,400 - $5,600 - $50,000 = $26,000

4.

Minimum profit required = $20,000

Contribution Required : Minimum profit + fixed costs:

$20,000 + $50,000 = $70,000

Contribution per unit on Store sale : $58 - $18 = $40

Contribution per unit on Ubereat sale : $48 - $28 = $20

Solving with equation:

Let x be the Unit sold at Store and y be the unit sold at Uber eat:

x + y = 2000.....equation 1

40x + 20y = 70000....equation 2

Solving 1 we get x = 2000-y

Solving 2 with x value:

40(2000-y) + 20y = 70000

80000-40y + 20 y = 70000

-20y = -10000

y = 500

Solving 1 Now:

x = 2000 - y

x = 2000- 500 = 1500

So to earn a minimum profit of $20,000 Bob's pizza can sell maximum of 500 Uber eats customer.

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