quantitative and qualitative analysis on Conner Pizza’s new product introduction and prepare a-10-minute presentation

– Accounting for Managers

Corner Pizza: A New Product Introduction DecisionSynopsis: The case focuses on concepts related to cost behavior and cost-volume-profit analysis. Specific topics covered in the case include contribution margin, functional andcontribution margin income statements and breakeven analysis on single and multiple products. Requirement:

▪

Each team must do a quantitative and qualitative analysis on Conner Pizza’s new productintroduction and prepare a-10-minute presentation to be delivered in the class.▪ Teams need to submit the presentation documents in the Blackboard > Assignments &Projects due dates > MBA 610 Projects> Project 2 New Product introduction link. ▪ MBA AF 610 – Accounting for Managers
Project 2
Corner Pizza: A New Product Introduction Decision
Synopsis: The case focuses on concepts related to cost behavior and cost-volume -profit
analysis. Specific topics covered in the case include contribution margin, functional and
contribution margin income statements and breakeven analysis on single and multiple products.

Requirement:
▪ Each team must do a quantitative and qualitative analysis on Conner Pizza’s new product
introduction and prepare a-10-minute presentation to be delivered in the class.

▪ Teams need to submit the presentation documents in the Blackboard > Assignments &
Projects due dates > MBA 610 Projects> Project 2 New Product introduction link.

This is
a group submission.
▪ Please list all team members names in document and save the file(s) as MBA 610-Project
2-Team #.
▪ Project Due date on December 7
Corner Pizza
“So many of our customers have asked for fresh salads … I think I’ve designed a menu of
healthy, appealing salads, and I’m inclined toward trying to satisfy them. ‘The customer
is always right’, no? But, adding these salads to our menu will add much complexity to
our operations … I am just not sure what to do …”
Antonio Sousa, founder and chef, Corner Pizza
Despite its plain name, Corner Pizza is not just any old neighborhood pizzeria. Rather, Corner
Pizza is known throughout several local communities for the distinctiveness and high quality of
its pizzas. Antonio Sousa has designed a menu of pizzas with tomato sauce made from fresh
homegrown tomatoes and herbs, high quality spices, domestic and imported cheeses, and an
unusual array of high-quality toppings including, for example, artichoke hearts, grilled eggplant,
fresh mozzarella, fresh basil, spinach, shrimp, clams and mussels, Greek olives, anchovies, and
fresh pineapple. In addition, customers can “customize” their pizzas by choosing their own
combinations of toppings.
Table 1 contains data regarding Corner Pizza’s average selling price and variable costs per pizza,
typical number of pizzas sold per month, and fixed costs per month.
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Table 1. Current Cost and Revenue Data, Pizzas
Per Pizza
Sales per month (number of pizzas)
Selling price per pizza
$20.00
Variable costs per pizza:
Ingredients (pizza dough, sauce, cheese)
Ingredients (pizza toppings)
Pizza boxes, paper plates, napkins, eating utensils
Total variable costs per pizza
$3.50
$4.00
$1.50
$9.00
Total
2,250
Fixed/Capacity costs (per month):
Storefront ownership (mortgage, insurance, property taxes)
Shift manager labor
Pizza maker, waitperson labor
Depreciation, equipment*
Telephone service, utilities
Owners’ salary and benefits, administrative costs
Total fixed/capacity costs (per month)
*Oven, stove, refridgerator, pans, paddles, counters, etc.
$1,500
$5,000
$6,000
$1,200
$400
$3,500
$17,600
Corner Pizza sells approximately 75 pizzas per day, 30 days per month, for a total of 2,250 pizzas
per month. Sousa employs two shift managers, for salaries and benefits worth $2,500 each per
month, as well as two people who each make pizzas and serve customers, for eight hours per day,
25 days per month, and $15 per hour, for total wages of $6,000 per month.
Sousa’s customers are very loyal, often purchasing several pizzas per month. However, many of
Sousa’s customers are also becoming increasing committed to eating more healthily and have
asked Sousa if he would consider putting large salads on Corner Pizza’s menu. Sousa is intrigued
by this idea and has designed a menu of creative, hearty salads which use fresh lettuces and other
mixed greens, many of the same ingredients that his pizzas use, such as tomatoes, artichoke
hearts, grilled eggplant, fresh mozzarella, fresh basil, spinach, shrimp, and Greek olives, as well
as other ingredients such as grilled red peppers and asparagus, carrots, cucumbers, grape
tomatoes, avocados, cashews, walnuts, and dried cranberries, and fresh, homemade dressings.
Sousa believes that he could leverage his relationships with his suppliers to get good prices on
the additional ingredients. Sousa has also realized that, in order to include these salads in Corner
Pizza’s menu, he will have to hire an additional person to help make pizzas and salads and serve
customers (at 8 hours per day, 25 days per month, and $15 per hour, for a total of $3,000 per
month). He would also have to purchase a second refrigerator and some miscellaneous equipment
such as colanders and salad spinners. Sousa estimates that his current customers would purchase
about 400 salads per month.
Table 2 contains the data that Sousa has collected thus far.
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Table 2. Basic Cost and Revenue Data, Salads
Per Salad
Sales per month (number of salads)
Selling price per salad
$16.50
Variable costs per salad:
Lettuce, mixed greens
Ingredients (carrots, artichoke hearts, antipastos, etc.)
Dressings
Plastic bowls, paper bowls, napkins, eating utensils
Total variable costs per salad
$3.50
$4.00
$0.50
$1.50
$9.50
Total
400
Incremental fixed/capacity costs:
Depreciation, equipment*
Additional pizza and salad maker, waitperson
Telephone service, utilities
Property and casualty insurance
Total fixed/capacity costs (per month)
*Second refrigerator, colanders, salad spinners, tossing bowls and utensils, etc.
$150
$3,000
$50
$50
$3,250
Should Sousa add salads to Corner Pizza’s menu? What quantitative factors and what
operational, qualitative or strategic factors should Sousa consider in making this decision?
Imagine that you are a summer intern working for Sousa. Please conduct an analysis of this
situation and develop a recommendation for Sousa. Then write a memorandum to Antonio Sousa
in which you characterize the problem that he is encountering and identify its causes, summarize
the analysis that you have conducted, and make your recommendation. Please support your
analysis with pertinent tables or exhibits.
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