Underlying Cost Structure and Startup Expenses

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

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.

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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



Please follow highlighted Part 2 from the picture above



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