Question

Use the following information to answer questions 6 & 7

Jim owns and operates a pizza franchise that makes and sells made to order deep-dish pizzas, Chicago style. The expected selling price is $14 per pizza. The projected variable cost per pizza is $4. The estimated fixed costs per month are $15,000.

Determine the number of pizzas that must be sold to make a monthly Net Income of $35,000?

Question 6 options:

	7,500
	5,000
	2,500
	2,000

Answer 1

SOLUTION:

Selling price -$14 per pizza

Variable cost-$4 per pizza

Estimated fixed cost-$15000

Sales - $14

Less:variable cost (4)

Contribution per unit $10

Net income=35000

Contribution(units)=fixed cost=15000/10=1500

Net income units=35000/10=3500

No of units=Contribution units+net income units=1500+3500=5000 units

Number of pizzas that must be sold to make a monthly Net income of $35000 are 5000 units so that

Contribution(5000*10)=50000

less:fixed costs =15000

Net income =$35000

OPTION B is correct