Question

The fixed cost of Perfect Pizzas, a pizza restaurant, is $400,000 per year. The cost of ingredients and chef to make one pizza is $6. If customers pay $10 to buy one pizza, Perfect Pizzas needs to sell at least _____ pizzas per year to avoid losses.

Answer 1

Answer:

The correct answer is 100,000 pizzas.

Explanation:

According to the scenario, the given data are as follows:

Fixed cost = $400,000

cost per pizza = $6

Sale price per pizza = $10

So, we can calculate the number of pizza to sell per year to avoid losses by using following formula:

First we calculate the profit per pizza

Profit = Sale price - Cost per pizza

= $10 - $6

= $4

Now, Number of pizza to sell = Fixed cost ÷ profit per pizza

= $400,000 ÷ $4

= 100,000

Hence, the number of pizza to sell per year to avoid losses is 100,000.