1. Your best friend, Mario, makes the most awesomepizza in town! He's decided to open a pizza shopand needs some advice. He expects his pizzas tocost about $4 to make and he plans to sell them for$10 apiece. He's going to rent a small space forcooking, which will cost him $200 per month. Healso plans to spend $60 per month on advertising.Utilities for his space are expected to be $100 permonth.a. How many pizzas must he sell each month tobreak even under these conditions?b. If he is confident that he can sell 80 pizza permonth, how much must he charge for each pizzato break even?2. a. Using the information in (1a), above, how manpizzas must he sell to make 8% net income on hissales revenue?b. Using the information in (1b), above, how muchmust he charge per pizza to make 8% net incomeon his sales revenue?3. a. Mario isn't comfortable with the currentnumbers. He thinks he canreduce hiscosts to $3.60 per pizza.a. If he does this and keeps his sales price at $10per pizza, how many must he now sell to make anet income of 8%?b. Instead, if he were to maintain his qualityingredients and reduce his advertising costs to $40per month, how many pizzas must he sell to makehis desired net income of 8%?4. Mario has decided to offer free delivery for hispizzas. He has persuaded you to be his deliveryperson. You will get $1.50 for every pizza youdeliver. He expects 75% of his sales to be delivery.All other costs will remain constant. As a result ofthe increased demand, he is sure he can sell 120pizzas per month. If he still wants to achieve a netincome of 8% of his sales and pizza prices are thesame whether or not they are delivered, how muchmust he charge per pizza?

Break-even analysis assesses the point at which total revenue equals total costs, determining the…

Answered: a. How many pizzas must he sell each…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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a. How many pizzas must he sell each month to break even under these conditions? b. If he is confident that he can sell 80 pizza per month, how much must he charge for each pizza to break even?