Assignment Directions:

Using your business idea, create an underlying cost structure. You may use reasonable estimates for various expenses.

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Brief Example
Start-up expenses- To start my pizza company, I will need \$2,000 for pizza oven, \$7,500 for furniture, \$15,000 for renovations and painting, and \$5,000 for business/legal expenses.

Underlying cost structure –
Fixed costs

Rent/utilities \$2,500 per month, \$30,000 per year
Office/marketing \$1,250 per month, \$15,000 per year
Corse staffing \$10 per hour, 48 hours per week, 350 days per year = \$168,000 per year

Variable costs

Raw food material \$1.50 per pizza
Paper goods \$.50 per pizza

Volume per day 50 pizzas, 350 days per yea r= 17,500 pizzas

Fixed costs- \$213,000 per year
Variable costs- \$2.00 per pizza X 17,500 pizzas = \$35,000 per year

Total costs- \$213,000 + \$35,000 = \$248,000
Volume- 17,500 pizzas

Price per pizza to break even = \$248,000/17,500 = \$14.17 per pizza

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