Page of 100 ZOOM + PINNI'S PIZZERIA Pinni's Pizzeria is a restaurant selling two types of pizzas: thin crust and deep dish. The expected selling price, variable cost and sales volume in units for 2016 are as follows: Thin Crust Deep Dish $8 $123 Selling Price per unit Variable Cost per unit Expected Sales (units) 100,000 150,000 The total fixed costs for the company are $600,000. They are common to both products. Required 1. Prepare a multi-product budgeted income statement using the contribution margin format. What is the projected operating profit for 2016? How would this prediction change if some of your customers come in groups, e.g., in families, and some family members like only thin crust and others like only deep dish? 2. How would the profit projection change if some customers of Deep Dish pizza decide to switch to Thin Crust pizza? 3. Suppose that in the next year you expect to sell only 40,000 thin crust and 100,000 deep-dish pizzas. Prepare a multi-product budgeted income statement using the contribution margin format. Explain why the profit projection in this case is different from (1). 4. Suppose in the next year you are planning to open a new store in a new neighborhood. The selling price, variable cost, and fixed costs will be the same at this new store. What is the breakeven volume for the new store? of 100 - ZOOM + Required 1. Prepare a multi-product budgeted income statement using the contribution margin format. What is the projected operating profit for 2016? How would this prediction change if some of your customers come in groups, e.g., in families, and some family members like only thin crust and others like only deep dish? 2. How would the profit projection change if some customers of Deep Dish pizza decide to switch to Thin Crust pizza? 3. Suppose that in the next year you expect to sell only 40,000 thin crust and 100,000 deep-dish pizzas. Prepare a multi-product budgeted income statement using the contribution margin format. Explain why the profit projection in this case is different from (1). 4. Suppose in the next year you are planning to open a new store in a new neighborhood. The selling price, variable cost, and fixed costs will be the same at this new store. What is the breakeven volume for the new store? 5. Now suppose that all fixed costs are directly related to the production of one of the products: fixed costs are product specific. Suppose the two pizza types require their own separate ovens and their own chefs. These product specific fixed costs can be avoided if that pizza type is no longer made and sold. Thin Crust Deep Dish $480,000 $120,000 Product Specific Fixed Costs Based on the original sales projections, does each product break-even? Would you consider dropping thin crust pizzas? Why or why not
