2.Frankie is thinking of entering the pizza market in the area surrounding his neighborhood. He is going to call his company Large Pizza. He realizes that the food industry is extremely competitive. Frank is willing to take the risk because of the high profit margin. His pizza will be sold at $10 per pizza . Variable costs are $3.00 for raw materials and $2.00 for direct labour per pizza. His fixed costs are estimated at $250,000. He currently has the capacity to make and sell 100,000 pizza during the first year. In order to justify spending his time at work, Frank needs to have 25% annual of his investment $550,000 per year.

a. What is the contribution margin ratio?

b. What is the breakeven in revenue?

b. How many pizzas must Fred sell to achieve his target income?

c. What is the margin of safety ratio given his target s ales?