Pizza Pizazz is a local restaurant. Price and cost information follows:

Pizza Pizazz is a local restaurant. Price and cost information follows:

 

Price per pizza	$	13.11
Variable cost per pizza
Ingredients		2.21
Direct labor		1.19
Overhead (box, etc.)		0.22
Fixed cost per month	$	3,036.80
Requirement 1:
Determine Pizza Pizazz’s break-even point in units and sales dollars. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole number. Omit the "$" sign in your response.)

 

Break-even units	320	pizzas
Break-even sales dollars	$ 4,195

 Explanation:

Contribution margin	=	Sales price – Variable costs
	=	$13.11 – $3.62
	=	$9.49

 

Break-even units	=	Fixed cost/CM per unit
	=	$3,036.80/$9.49
	=	320 pizzas

 

Break-even sales dollars = 320 × $13.11 = $4,195

Requirement 2:

Determine the restaurant’s margin of safety if it currently sells 380 pizzas per month. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number. Omit the "$" sign in your response.)

 

Margin of safety

$ 787

Explanation:

 

Margin of safety	=	Current sales – Break-even sales
	=	(380 – 320)$13.11
	=	60 units × $13.11
	=	$787
Requirement 3:
Determine the number of pizzas that Pizazz must sell to generate $1,600 in profit. (Round your intermediate calculations to 2 decimal places and final answer up to next whole number.)

Target sales

489  units

Explanation:

Target sales	=	(Fixed cost + Target profit)/CM per unit
	=	($3,036.80 + $1,600)/$9.49
	=	489 units (rounded up from 488.60)