Assumptions And Limitations Of Marty 's Pizza Business Essay
In this investigation assumptions were made regarding Marty’s pizza business. One assumption, in regards to tax, was that 9000 items of each pizza type were sold. Selling more or less than this amount would have consequently increased or decreased the overall profit, and therefore the tax payable. Another factor assumed is that the selling price, variable costs, and fixed costs remained at the same rate for the whole financial year. Factors such as competition of similar businesses may cause a decrease in the selling price, while variable costs may be minimised or increased over the financial year depending on the cost of ingredients to create the pizzas. Another assumption is that the sideline business is feasible, which depending on the market, impacts the overall performance of the business. For example, competition of similar businesses could reduce customers. Finance options were not considered, such as additional set-up costs, tax deductions and depreciation tax on equipment, and Marty’s overall budget for running the business, which would impact the overall profit.
Marty’s sideline business should be marketed through advertising to promote the pizzas to potential customers. The charge would be included within the total fixed costs, justified through the extra revenue brought to the business through promotion.
Using the data collated on the basic pizza type, it is recommended that the selling price be placed at $7.30, the…