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Hi, I'm struggling with this management accounting question. Please help For nearly two years, Per has had a pizzeria where he has baked and sold
Hi, I'm struggling with this management accounting question. Please help
For nearly two years, Per has had a pizzeria where he has baked and sold luxury pizzas to the customers visiting his restaurant. The restaurant is decorated tastefully in classic Italian style. In the period, he has achieved a good reputation in the local area, and he has a stable customer base that visits the restaurant regularly. Today, a very critical situation for Per's Pizzeria has arisen. For the sake of public health, the authorities have imposed social distancing rules including the closure of all restaurants with immediate effect. However, it is possible for him to use the kitchen for production of food for take-away. Per has to consider how to handle this situation. His present business model with a restaurant, where customers are seated and being served at tables, has fallen apart with immediate effect. If he does nothing, he has zero DKK in turnover as from now on until the rules will be changed again. However, his costs do not disappear. The direct raw material costs for pizzas will disappear of course, if the production is stopped. He has sent the non-permanent staff working as waiters and dishwashers home, so this cost will also be discontinued. He is left with a labour cost for a permanently employed cook and a permanently employed waiter. Both have a term of notice of 1 month from the following first day in the month for dismissal. In practice it means that Per has to pay these two salaries for additionally 7 weeks at least. Both employees have accepted to take on work that is outside of their actual job description, if they can keep their job. Besides, there are fixed costs for rent, insurances etc. Based on the information Per has been able to get, he must expect to keep the restaurant closed for 6 weeks. Then he expects to be able to open again and continue his former business model. Question 1 Based on the above text, please identify potential decision-relevant information. Please explain thoroughly, why the cost items you identify are decision-relevant. Per decides to start up a take-away solution. I. e. a solution where people order pizzas by phone, e-mail or via the Facebook-page of the restaurant, and pick them up at the restaurant at a given time. However, he doubts how to price the pizzas, since people no longer get the experience of staying in the restaurant. Question 2 In general, which three overall factors should be taken into consideration concerning pricing of products? And how can they be applied to Per's situation specificallyStep by Step Solution
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