{QUESTION}

Bongo’s Pizzas has a service guarantee that promises you will not pay for your pizza if it is

delivered more than 30 minutes from the order being placed. An investigation shows that 10 per

cent of all pizzas are delivered between 15 and 20 minutes from order, 40 per cent between 20

and 25 minutes from order, 40 per cent between 25 and 30 minutes from order, 5 per cent

between 30 and 35 minutes from order, 3 per cent between 35 and 40 minutes from order, and 2

per cent over 40 minutes from order. If the average profit on each pizza delivered on time is $1

and the average cost of each pizza delivered is $5, is the fact that Bongo’s does not charge for 10

per cent of its pizzas a significant problem for the business? How much extra profit per pizza

would be made if 5 minutes was cut from all deliveries?

{ANSWER}

Order delivery time and percentage:

Percentage Delivery time (min)

10% 15-20

40% 20-25

40% 20-30

After delivery time:

Percentage Delivery time (min)

5% 30-35

3% 35-40

2% 40

Profit of 90% Pizza = $1 $1×0.9 = $0.9

Cost of Pizza = $5 $5×0.95 = $4.5

Free delivery of Pizza = 10%

So

10% or 0.10 × $5 = 0.5

How much extra profit per pizza would be made if 5 minutes was cut from all deliveries?

Gain

The time of all pizza delivery will be cut 5 minutes before:

Likewise if our delivery time starting from 15-20 minutes we could cut 5 minutes before, so that

15-20 minutes will considered 10-15 minutes,

Percentage Delivery time (min)

10% 10-15

40% 15-20

40% 20-25

5% 25-30

Sale of Pizza = 95%

Profit of Pizza = $1

Sale of Pizza × Profit of Pizza

95% × $1 = 0.95

Cost of Pizza

95% × $5 = 4.75

Loss

Percentage Delivery time (min)

3% 30-35

2% 35-40

Cost of pizza × Percentage of Loss

$5 × 5% = $0.25