Pete's Pizzas is a small company that makes gourmet frozen pizzas for supermarkets to sell. Each pizza
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Question:
Pete's Pizzasis a small company that makes gourmet frozen pizzas for supermarkets to sell. Each pizza is sold to a retailer for $6.00. Variable and fixed costs are:
| Item | $ |
|---|---|
| Variable cost per pizza | |
| Toppings | $0.70 |
| Cheese | $0.35 |
| Dough | $1.85 |
| Handling | $0.34 |
| Box | $0.76 |
| Selling | $0.40 |
| Fixed Cost per annum | |
| Overheads | $32,300.00 |
| Administration | $12,500.00 |
Pete's Pizzas sold 35,000 frozen pizzas last year.
Required:
(A) WHAT IS THE CONTRIBUTION MARGIN FOR ONE FROZEN PIZZA?
(B) WHAT IS THE CONTRIBUTION MARGIN RATIO FOR FROZEN PIZZAS?
(C) WHAT IS THE BREAK EVEN POINT IN NUMBER OF PIZZAS SOLD?
(D) WHAT IS THE BREAK EVEN POINT IN SALES REVENUE?
(E) ASSUME PETE'S PIZZAS WANT TO INCREASE THE SELLING PRICE FOR A FROZEN PIZZA TO $6.50, BUT THEY EXPECT SALES TO FALL BY 10% AS A RESULT. SHOULD PETE'S PIZZAS INCREASE THE PRICE OR NOT? SUPPORT YOUR ANSWER WITH A RECALCULATED BREAK EVEN POINT IN PIZZAS SOLD.
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