Question

George loves to cook and is deciding in regards to whether he should open a pizza place or a sandwich shop however he would like your help to understand the break-even for each type of restaurant and the markup percentage for each of the main products he will sell at each store.

If George opens a pizza shop he will have to buy a new pizza oven which will cost him $40,000. He will also have to buy different kitchen tools which will cost $20,000. The pizza shop rent will be $1500 per month and his electricity bill will be $500/month. George also will have some help to make pizza and will hire an employee who he will pay $15/hour. This new employee can make 10 pizzas per hour. Lastly George will be paying $100 per month on insurance costs.

To make pizza the pizza dough costs $1/pizza and the cheese costs $2/pizza, sauce costs $0.50 per pizza and the toppings cost him $2.50/pizza. George will also offer a pizza box for each order which costs $2.00 each. At George’s pizza shop he will charge $20/pizza

If George opens a sandwich shop he will need to buy a panini press (sandwich grill) for $5,000 He will also have to buy different kitchen tools for making pizza which will cost $5,000. Lastly he will also need to buy fridges and freezers to keep his sandwich ingredients fresh which will cost $30,000. George will hire some help to make sandwiches who he will pay $15/hour and this employee will make 20 sandwiches per hour. George will also pay $100 per month on insurance costs.

To make sandwiches the bread will cost $1.00/sandwich, $1.00 for vegetables per sandwich and $3.00 for meat/sandwich. He will sell the sandwiches for $10 each.

1. Markup % for Pizzas and Markup % for Sandwiches ( pls show your work)

2. Calculate the break-even in units for pizza for the year

3. Calculate the break-even in units for sandwiches for the year

4. Should he open pizza shop or sandwich shop?

Answer 1