Question

a.Consider the restaurant Pepperoni Passion, which sells only pepperoni pizza. The expenses for the restaurant are shown below. Monthly Fixed Costs Per Pizza Variable Costs General Labor $1,700 Rent $2,700 Insurance $300 Advertising $400 Utilities $525 Flour $0.75 Yeast $0.10 Water $0.05 Cheese $2.75 Pepperoni $1.50

b. If Pepperoni Passion prices its pizzas at $12 each, how many pizzas must it sell per month to break even? Round your answer to the nearest whole number. Annual fixed costs for a product are $75,000. The product itself sells for $6 and it costs $2 in variable costs to make each product. By how many units will the annual break-even point for the product change if the variable cost per unit goes up to $2.50?

Answer 1

1)Fixed costs:
Genral labour=1700
Rent=2700
Insurance=300
Advertising=400
utilites=525

Variable costs:
Flour=0.75
years=0.1
water=0.05
cheese=2.75
pepperoni=1.5

selling price=12
Breakeven in units= fixed costs/(selling price-variable price per unit)
=(1700+2700+300+400+525)/(12-(0.75+0.1+0.05+2.75+1.5))
=822(rounded)

2)annual fixed costs=75000
selling price=6
variable cost=2
new variable cost=2.5
breakeven units(old)=75000/(6-2)
=18750
breakeven units(new)=75000/(6-2.5)
=21429
it has increased by 21429-18750=2679