PIZZA PAZZA
Case Questions
Discuss the following questions in the group – you may treat all four questions as independent of each other.
Pricing: Assume Jean and Jacqueline decide to hire two employees to perform their respective tasks; each paid €8 per hour. What is the contribution margin (revenue - variable
costs) generated per hour of operation of the process if pizzas sell for €5 each? What is
the minimum amount that Jean can charge per pizza, and still make a profit?
Investment: The pizzas have become wildly popular, and Jean feels that they can easily
sell thirty pizzas per hour. To increase capacity, he is thinking of renting additional industrial ovens, which would cost €10 for each hour that an oven is used. Should Jean rent
more ovens, assuming the rest of the process is kept as is? How many? (Think in terms of
return on investment.) Can you do better by restructuring the process?
Marketing: Jean is now producing two types of pizzas: in addition to thin-crust he now offers (American-imported) Chicago-style deep-dish. All activity times are as before, except
that deep-dish requires longer sauce preparation (5min vs. 2 min for thin-crust) and baking (29min vs. 15 min for thin-crust).
Assume that deep-dish pizzas sell for €7.50 and require €1.90 worth of ingredients. Which
of these two products should Jean push to customers that call in and are undecided?
Sales/Service: After operating for a few weeks, Jean realizes that hourly orders follow a
predictable pattern: during a 2-hour busy period in the evening, the restaurant receives 6
orders/hr and some customers must wait a little for their pizza. After this peak period, the
order rate falls to 2 orders/hr. What is the maximum time a customer must wait? When is
the backlog cleared? (Tip: draw a build-up diagram showing how the backlog (unfilled orders) changes throughout the evening.)
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