Massimo had always dreamed of starting his own brick oven pizza kitchen.Now that he was in an Entrepreneurship class and in his junior year as a Business Major at University, he decided that it was about time that he took the first step in realizing his dream.Massimo wasn't ready to open a full-fledged restaurant but he thought that he might have an idea that would help him test out his business skills while he was still in school.He could make specialty cheese or pepperoni pizzas, market them to the college students in the area and anyone else who was interested.He would have the local delivery company pick them up and deliver them so that he didn't have to have delivery people on standby even during slow times.

Massimo's parents were fully supportive and each gave him a non-taxable gift of $14,000 for a total of $28,000 that he put towards starting his business.He incorporated Gubbios Pizza as a Pennsylvania corporation and went looking for a small studio apartment he could rent that he could use as his kitchen and pick up spot for the delivery company.Massimo was in luck, he found a perfect studio apartment with a one-year lease that was not far from school so he could even work between classes.The rent was only $600 per month.Massimo decided to open his business on January 1 of the following year.He would use the $28,000 gift from his parents as the initial capital investment and pay himself $500.00 per month.

Massimo knew that he wanted to turn a profit in his business and he decided to start by collecting a chart of all of the items that he would need to buy or have on hand for the pizza making business.He found a pizza oven on eBay from a man who was getting out of the brick oven pizza business.He purchased a Point of Sale iPad system, including the iPad and signed up for monthly software connection from the company.He purchased ingredients for the pizza crust, sauce, cheese and pepperoni in bulk to reduce costs of the ingredients.He also found a good source for the pizza boxes.

Massimo knew that he would work for the business and decided on a monthly salary for himself.He hired two of his friends, Carlo and Tricia to work for him making pizzas.He also hired a former soccer teammate who had graduated to be the Accountant for the business.Massimo planned to do everything he could to keep the books organized but wanted an accountant to look over the financial statements after he prepared them and also to prepare the tax returns.All of Gubbio's Pizza's cost drivers are listed in the Cost Information Table. please classify all of the costs in the various columns in the table labeled Classification of Cost.The categories of costs that you will be using are 1) fixed or variable costs, 2) Direct or Indirect costs, 3) Product or Period Costs and 4) If the costs are Product Costs, identify whether each Product cost is a Direct Material, Direct Labor or Manufacturing Overhead cost.

Classification of Costs Direct Direct m Period Variable Material Labor Overhead Pizza Oven Yeast Sugar, Salt Sauce (imported and trade secret) Cheese IIIII IIIIIIIIII Pizza Boxes IIIIIIIII IIIIIIIIII IIIIIIIIII wag, Point of IIIIIIIIII Point of Sale I II IIIII Utilities (gas, electric and IIII-IIII Business Cell Phone IIIIIIIIII IIIIIIIIII IIIIIIIIII IIIIIIIIII Del ivery compa ny payment IIIIIIIIII pav Cost Information Equipment and Ingredients tandard per Pizza Pizza Oven $5,000 bakes 10 pizzas per hour} Refrigerator n/a (already in house) Pizzaswnes Bread Flour $43 for 25-pound bag 1 pound Yeast, Sugar, Salt and Olive Oil Yeast - $11 for 2 pounds $1.00 per pizza total Sugar - $16 for 10-pound bag Salt - $9 for 3-pound bag Olive Oil - $45 for 1-gallon jug Sauce (imported and trade $50 for 249; m. Cheese $55 for 6-pound bag 1 cup Pepperoni $30 for 3-pound bag (250 slices) Pizza Boxes $16 for 50 boxes Business Licenses Rent (Bad, Point of Sale System Point of Sale Software Utilities (gas, electric and water) Business Cell Phone SalawMassimo Salary high school helpers $10/hour 1 person 30 minutes per pizza (Carl and Tricia) Delivery Company Payment $2.00 per pizza 2.00 per pizza Accountant $200/month Estimated Manufacturer's $3.00 per pizza Overhead 33"\" "'--."'--. mm |