Break-even Point and Profit Calculation for Keith's Cheese Business
a. How can we calculate the number of pounds of mozzarella that Keith needs to sell in a week to break even?
Name: Keith
Product: Meccarelle Cheese
Selling Price: $5.00 for a 1 pound contains
Costs: Kitchen rentals $25/week
Milks $4.50/ gallon
Other ingrediende $0.25 pound of cheese made
Packaging Options: Carton ($10.25 each) and Paper Bag ($30.10 each)
b. What advice will you have for Keith at your next meeting?
c. How can Keith price the ricotta cheese made from the waste of mozzarella to ensure profitability?
d. How many pounds of mozzarella does Keith now need to make in order to make a profit this month, considering the ricotta sales?
Final answer:To find the number of pounds of mozzarella that Keith needs to sell in a week to break even, set up an equation using the total costs and selling price. Advise Keith to analyze market demand, production costs, and competition for pricing and packaging. Determine the number of pounds of mozzarella Keith needs to make to make a profit, considering the selling price and costs of ricotta cheese.
a. Equation for Break-even Point
To find the number of pounds of mozzarella that Keith needs to sell in a week to break even, we can set up an equation. The total costs include the kitchen rentals, milk, other ingredients, and packaging. Let's say Keith needs to sell x pounds of mozzarella. The equation would be: 5x = 25 + 4.50(gallons of milk used) + 0.25x (pounds of cheese made) + (price of packaging per pound of mozzarella)(x). Solving for x will give us the number of pounds of mozzarella Keith needs to sell in a week to break even.
b. Advice for Keith
At the next meeting, I would advise Keith to carefully consider his pricing strategy and packaging options. He should analyze the market demand, production costs, and competition to determine the optimum selling price and packaging type.
c. Pricing Strategy for Ricotta Cheese
Considering that Keith can make a quarter pound of ricotta cheese from the waste of each pound of mozzarella, he could package and sell ricotta cheese in addition to mozzarella. The price for the ricotta cheese should cover the cost of packaging and include a profit margin. Keith can choose to sell ricotta by the pound or the quarter pound, depending on market preferences.
d. Profit Calculation
To calculate the number of pounds of mozzarella that Keith now needs to make in order to make a profit, we need to consider the selling price of the ricotta cheese and the recommended price from part c. The profit can be calculated as the revenue from selling mozzarella and ricotta cheese minus the total costs. We can set up an equation to solve for the number of pounds of mozzarella.
Explanation: To find the number of pounds of mozzarella that Keith needs to sell in a week in order to break even, we can set up an equation. The total costs include the kitchen rentals, milk, other ingredients, and packaging. Let's say Keith needs to sell x pounds of mozzarella. The equation would be: 5x = 25 + 4.50(gallons of milk used) + 0.25x (pounds of cheese made) + (price of packaging per pound of mozzarella)(x). Solving for x will give us the number of pounds of mozzarella Keith needs to sell in a week to break even.
At the next meeting, I would advise Keith to carefully consider his pricing strategy and packaging options. He should analyze the market demand, production costs, and competition to determine the optimum selling price and packaging type.
Considering that Keith can make a quarter pound of ricotta cheese from the waste of each pound of mozzarella, he could package and sell ricotta cheese in addition to mozzarella. The price for the ricotta cheese should cover the cost of packaging and include a profit margin. Keith can choose to sell ricotta by the pound or the quarter pound, depending on market preferences.
To calculate the number of pounds of mozzarella that Keith now needs to make in order to make a profit, we need to consider the selling price of the ricotta cheese and the recommended price from part c. The profit can be calculated as the revenue from selling mozzarella and ricotta cheese minus the total costs. We can set up an equation to solve for the number of pounds of mozzarella.