How many pizza pies must sold to reach accounting break-even

Reference no: EM131972116

Problem

Rustico's Restaurant is thinking of purchasing a wood-fired pizza oven to increase options at the restaurant beyond the freshly made pasta offerings. The oven costs $400,000 and can be depreciated straight-line to zero in the next five years. The pizzas can be sold for $15.00 and variable costs for labour and ingredients are estimated at $11.00 for each pie.

a) If the pizza business is expected to contribute $75,000 to the overhead (fixed) costs of the business, how many pizza pies must be sold to reach Accounting Break-Even?

b) How does this compare to the Financial Break-Even, when the cost of capital is 10% and the tax rate is 28%?

Reference no: EM131972116

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