Computation ANSWER Revenue 11*700,000 7,700,000 Less Desired Profit .20*4,000,000 (800,000) Target full product Cost 6,900,000 Variable Costs 7.22*700,000 5,054,000 +Fixed Costs 2,000,000 =Total Costs 7,054,000 Difference 7,054,000-6,900,000 154,000 Target Pricing --Biggest pizza (20 inch pizza) Company plans to open a factory with a retail store in the front. The investors want a 20% return on investments on the assets of $4,000,000. Fixed costs are expected to be $2,000,000 for the year and they estimate that they will sell 700,000 big pizzas in a year. Variable cost per pizza is $7.22 Computation Current variable costs + Fixed costs = total product cost +Desired profit =Target revenue Divided by # of units =Price per unit 6. What is the minimum selling price Biggest Pizza Company should charge? 7. Complete the chart below assuming they decide to charge a selling price of $15.50