Business Accounting - Assignment Example

The pizza oven that I invented replaces the utility of a ?10,000 oven for a fraction of the price. The oven is able to cook personal pizzas of nine inches in three minutes or less. The reason that the pizza is cooked so quickly is because the oven cooks the pizza at 825 degree Fahrenheit. There are currently no existing ovens for street vendors that can reach the temperature needed to cook pizzas quickly. The idea is to sell the ovens with licensing contracts to generate both instant sales and residual income.

The cost of building and integrating three ovens into a hotdog vending cart or similar equipment is ?1,500. The product would be sold to these types of clients that are looking to expand their business for ?5,000. The gross margin of the sale is 233%. Vendors interested in the proprietary rights of the oven have to pay a 10% on net sales royalty fee. The royalty fees must be paid on a monthly basis. People interested in the product have a second option if they not have an existing business. The product can be sold in as a pizza cart vending equipment that can be used to start your own business.

The price of the pizza cart with three ovens is ?25,000. The cost to produce the pizza cart is ?13,000. The gross profit on the sale of the pizza cart equipment is 92.30%. . The pizza style that these ovens cook is called Neapolitan pizza. Neapolitan pizza is a premium pizza meal cooked in Italy in brick ovens at high temperatures. The clients that purchase the oven attachments or the pizza cart can advertise the business as Neapolitan pizza mobile restaurants. This niche market allows the vendors to offer a specialty product at fair prices.

The suggested retail price of a personal pizza with one topping and a soda is ?3.15. Business partners will have the flexibility to charge up to ?4.38 for a pizza combo because the premium nature of the product can support a higher price point than ?3.15. The sales projections of the company are based on the estimate that a pizza restaurant can generate yearly sales of ?276,500. The table below shows projected income for the next year. units Pounds Oven upgrades income 50 250000 Pizza carts income 25 625000 875000 Royalty income 2073750 Total income 2948750 Expenses Oven upgrade 50 75000 Pizza carts 25 325000 Labor costs 480000 Administrative expenses 500000 Other costs 100000 Business loan 55824 Total Expenses 1535824 Net income 1412926 The projected net income includes sales of 50 oven upgrade packages and 25 pizza cart equipments.

These two sources of income will generate revenues of ?875,000. There is money to be made by selling equipment, but the real money maker in this business model is the royalty income. The projected royalty income for the first year of operations is ?2,073,750. The projected net income of the company is ?1,412,926 with a net margin of 49.80%. Net margin is a financial metric that measures profitability (Investopedia, 2012). The reason that the net margin is so