Question
Written Question A. At XYZ Restaurant, which sells only pepperoni pizza, has the cost profile: [Note that variable costs are per pizza Fixed Costs Variable
Written Question A. At XYZ Restaurant, which sells only pepperoni pizza, has the cost profile: [Note that variable costs are per pizza
Fixed Costs Variable Costs
General Labor $1,500 Flour $0.50
Rent $3,000 Yeast $0.05
Insurance $200 Water $0.01
Advertising $500 Cheese $3.00
Utilities $450 Pepperoni $2.00
Total $5,650 Total $5.56
Based on the total variable expenses per pizza, we now know that XYZ Restaurant must price its pizzas at $5.56 ($0.50 + $0.05 + $0.01 + $3.00 + $2.00) or higher just to cover those costs.
We also know that if the pizzeria charges $10 for the finished product, then it receives $4.44 per pizza to contribute to the fixed costs and ultimately the restaurants overall profits.
Question: How many pizzas does XYZ Restaurant need to sell at $10 each to cover all those fixed monthly expenses?
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