Reference no: EM132671645
Five-Star Pizza delivers pizzas to the residential halls and tiniits fear a major university. The company's annual fixed expenses are $40,000. The sales price of a pizza is $16, and it costs the company $8 to make and deliver each pizza.
Required:
Problem 1. Calculate the company's break-even point in units (pizzas).
Problem 2. What is the contribution margin ratio?
Problem 3. Calculate the break-even sales revenue. Use the contribution margin ratio in your calculation.
Problem 4. Explain the concept of 'break-even' point and justify your answers in 1 & 3 above, with the calculation using contribution margin format of income statement.
Problem 5. How many pizzas must the company sell to earn a target net profit of $50,000? (Ignore income taxes.)
Problem 6. How many pizzas should Five-Star Pizza sell in order to make a $60000 net profit after tax? Assume that the tax rate is 25%.
Problem 7. What is the Five-Star Pizza's total profit or loss when 5200 pizzas are sold?
Problem 8. What is the Five-Star Pizza's total profit or loss when 4800 pizzas are sold?
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