Problem: Vince's Pizza

Vince's Pizza delivers pizzas to dormitories and apartments near a major state university. The company's annual fixed costs are P4,800,000. The sales price averages P900, and it costs the company P300 to make and deliver each pizza.

1. How many pizzas must Vince's sell to break even?
2. How many pizzas must the company sell to earn a target net profit of P5,4000,000?
3. If budgeted sales total 9,900 pizzas, how much is the company's safety margin?
4. Vince's assistant manager, an accounting major, has suggested that the firm should try to increase the contribution margin per pizza. Explain the meaning of "contribution margin" in layman's terms.

Problem: Austin, Brown, Freeman

Below are income statements that apply to three companies: Austin Co., Brown Co., and Freeman Co.:

	Austin Co.	Brown Co.	Freeman Co.
Sales	P100	P100	P100
Variable costs	(10)	(20)	(30)
Contribution margin	P90	P80	P70
Fixed costs	(30)	(20)	(10)
Profit before taxes	P60	P60	P60

1. Within the relevant range, if sales go up by P1 for each firm, which firm will experience the greatest increase in profit?
2. Within the relevant range, if sales go up by one unit for each firm, which firm will experience the greatest increase in net income?
3. At sales of P100, which firm has the highest margin of safety?