Calculator Allowed: Yes



Transcription of this question: Calorie Count (CC)Evana Dox has recently set up her own business, called Calorie Count (CC). She has identified aprecise market segment: local middle-aged people struggling to have a healthy lifestyle becauseof long working hours. Customers will order meals in the morning, and in the evening Evana willdeliver the meals.Evana is converting the ground floor of her house into a professional kitchen complying with allhygiene standards and food safety regulations. She will employ her niece Athena, a graduatefrom a catering college. of the initial investment and start-up costs will come from Evana’spersonal savings; the other 40 % will be financed by external sources.Evana has carried out secondary market research and found that the net profit margin in cateringbusinesses of the same size is 35%. However, for her new business Evana knows that her netprofit margin will be much lower.For her first year of operations, she aims for a net profit margin of 15%. In the first year, shehopes to sell an average of 50 meals per day, 5 days per week. She estimates that each mealwould be sold at an average price of $17. This price, Evana believes, will be competitive and willgenerate an adequate contribution per meal for her business to be successful.CC uses a cost-based pricing strategy, with the following estimated costs:variable cost per meal: 70% of selling price• fixed cost per annum: $42 000.(a)(b)(c)(d)Identify two variable costs for CC.Define the term contribution.Calculate for CC:(i)(ii)(iii)the break-even level of output (show a/’ your working);the margin of safety, if it sells 50 meals per day, 260 days per year (show allyour working);the profit or loss, if it sells 50 meals per day, 260 days per year (show allyour working).Construct a fully labelled break-even chart, to scale, for CC.Analyse the appropriateness of a cost-based pricing strategy for CC.[2][2][2][2][2][5][5]

Leave a Reply