Pats Pizzeria produces three types of deli style pizzas: Thin Crust, Deep Dish, and Stuffed Crust. Pats anticipated sales mix is 4:5:6 Thin:Deep:Stuffed. Current sales are 1,500 bundles per year.

	Thin Crust	Deep Dish	Stuffed Crust
Unit Selling Price	$15	$18	$20
Unit Variable Cost	$8	$10	$11

Fixed costs are estimated at $50,000, which include $44,000 for general overhead, such as rent, utilities, etc., and $6,000 for advertising. Pats tax rate is 20%.

Round all interim answers to 4 decimal places. For all questions, supporting calculations MUST be included.

D. If Pat increases advertising costs by 200%, sales of all types of pizzas are expected to increase by 12% above the original sales levels. Assuming the sales mix will remain the same, should Pat increase her advertising expenditure? Why or why not?

E. What is the minimum percentage sales would need to increase before Pat would consider the additional advertising? (Hint- how much additional sales revenue is needed to earn at least the same profit she had without advertising?)

(Return to the original problem assumptions for parts F G. Do not assume advertising has been increased.)

F. How many bundles of pizza will Pat have to sell to earn after-tax profits equal to 15% of revenue?

G. In analyzing results at the end of the year, Pat discovered that, although she sold 22,500 pizzas as planned, the actual sales mix was 6 Thin Crust, 6 Deep Dish, and 3 Stuffed Crust pizzas. How did Pats actual profit differ from her projected profit? Explain why this happened.