Question

( question 2 depend on question 1 part k )

1. Assume that you would start a business of having a hot dog truck at KPU Surrey campus

a. Identify your fixed costs and variable costs

b. Identify pricing tactic you would deploy?

c. Decide on a selling price for your hot dog (consider you have only one size)

d. what is your mark up?

e. Based on your selling price, what is your contribution?

f. How many hot dogs do you need to sell to make a profit per month? (Do a Break-even analysis)

g. What should be your daily average sales quantity (assume you open 20 days per month)

h. What are things you could do to lower your break-even sales quantity?

i. What are some things you could do to make sure you meet your break-even point as quickly as possible?

j. Identify some of your pull strategies?

k. What type of promotions would you do to improve your sales?

(Full marks will be awarded for using realistic pricing and practical approaches)

( question 2 depend on question 1 part k )

2. Based on your promotion decided, develop your promotional material? Use any appropriate promotional media and marks awarded based on creativity

Answer 1

Answer 1:

a) Fixed cost would involve the cost of purchasing the truck and the cost of various equipments such as gas, oven, and utensils. Variable cost would include the cost of raw materials such as vegetables, bread and other ingredients of the Hotdog.

b) Pricing would be according to the affordability of the target customers and the competitive prices that are being charged by the competitors in the market. Tactics would include pricing the product that would help in recovering the cost of making of the product and the expected profit.

c) Selling price for hotdog would be $2. Pricing the product for get one on one offer whose price would be slightly higher than a single product but lesser than the 2 pieces of hotdog.

d) Mark up price would be $2.5 depending on the cost of making, expected profit and overhead cost.

e) The contribution as far as variable price is concerned should be not more than $1.5 so as to make the profit of atleast $0.5.

f) In order to make the profit per month, I need to sell atleast 5000 hotdogs so as to make the profit of atleast $2500 as per the calculation of contribution if “e”.

g) Daily average sales to sell 5000 hotdogs in 20 days should be (5000/20) 250 hotdogs on an average per day.

h) Increasing the number of customers would be one of the solutions to lower the break even sales quantity. As the number of customers will increase, break even quantity would be lowered after certain period of time. Other things that are needed to ensure so as to reduce the breakeven point is reducing the amount of fixed cost and variable cost and increasing contribution margin.

i) Selling more number of products by increasing the number of customers would help in achieving the breakeven point in the initial days as it would help in meeting the cost required for making hotdog.

j) Some of the pull strategy would include providing complementary products along with the hotdog at lesser cost, providing hotdog with one free on one so as to attract customers.

k) In order to improve the sales, I would do advertising, public relation and direct marketing.

Answer 2:

In order to improve the sales, I would distribute the pamphlets in the local newspapers and would publish the ad in the local magazine as a part of advertising. I would also do social media marketing that would not cost me and would help in making the customers aware about my offerings as a part of public relation promotional strategy. I would collaborate with certain nearby businesses and working people so as to sell them hotdogs in their breakfast as a part of direct selling.