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Breakeven, Target Profit and Safety Margin

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Tony's Pizza delivers pizzas to dormitories and apartments near a major state university. The company's annual fixed costs are $48,000. The sales price averages $9, and it costs the firm $3 to make and deliver each pizza.

A. How many pizzas must Tony's sell to break even?
B. How many pizzas must the company sell to earn a target profit of $54,000?
C. If budgeted sales total 9,900 pizzas, how much is the company's safety margin in dollars?

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Solution Summary

This solution provides steps to determine the breakeven point, target profit and safety margin.

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A. How many pizzas must Tony's sell to break even?

Selling Price $9
Less: VC $3
UCM $6

BEP in Units ...

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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