Question

# Use the following information to answer questions 6 & 7 Jim owns and operates a pizza...

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

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

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