Question 6 Paul Molloy's owns and runs Luigi Pizza Parlour (Luigis) which operates from their restaurant on main street Maynooth. Paul is currently considering two new potential business opportunities. Opportunity one Fintos Limited, a software company based in Maynooth Business Park, have approached Luigis wishing to place a regular Saturday order for 300, three-topping pizzas (cach topping will cost 0.35). A price of 7 per pizza is proposed and Fintos will collect the pizzas directly from the restaurant. To fulfil the potential order, both chefs have agreed to each work 8 extra hours at an overtime rate of 140% of the normal rate. Opportunity two Following Fintos Ltd's approach Paul is considering leasing a mobile kitchen unit, which he could locate in Maynooth Business Park where approximately 4,000 people are currently employed. He could lease the unit for 2,020 per month, operate on a delivery only basis twenty days a month for lunch hours only. Paul is projecting 2.5% of employees would purchase a one-topping pizza for 6, if delivered to them within 10 minutes. Following careful examination, the energy costs for the mobile kitchen unit would be identical to the fixed and variable costs of the restaurant. Staffed by two part-time chefs working three hours per day at the rate of 10 per hour and the current delivery contractor would deliver each pizza at half the current delivery cost given the close proximity of customers to the mobile kitchen. Paul has provided a summary of the cost of producing a two-topping pizza: Base 0.60 Tomato sauce 0.65 Cheese 0.75 Toppings 0.35 each The average gross profit margin for pizza is 80% and sales in the last two months were: March 2017 3,600 pizzas April 2017 5,100 pizzas In addition to the above costs, the monthly energy cost, comprising of both a fixed monthly charge and a variable charge for energy used in the restaurant were: March 2017 2,250 April 2017 2,700 Two chefs are employed on a 36 hour week, receiving 360 per week and a contract delivery supplier charging 1.30 per pizza delivered Requirement: (a) Using the high-low method, calculate the variable energy cost per pizza and the monthly fixed energy cost at the restaurant 3 Marks (6) Compute the potential weekly operating profit on the proposed contract with Fintos Ltd. 7 Marks (c) Compute the monthly break-even point in pizzas for the proposed mobile kitchen unit and the anticipated percentage margin of safety thereon. Comment on your findings. 10 Marks