Compute the number of pizzas that must be sold to earn a net profit of $60,000.
I have decided to open a pizza parlor in my hometown. I plan to deliver my pizzas in a four mile radius from my shop. My annual fixed expenses are $54,000. I will charge $10 for a pizza and it costs $6 to make and deliver each pizza. Do not calculate in income taxes.
The annual fixed expenses of the pizza parlor are $54000. The cost of delivering each pizza is $6 and the prize of each pizza is to be kept at $10.
To earn a profit of $60000 let the number of pizzas required to be sold be X. The total cost is the sum of the the fixed cost i.e. $54000 and the variable cost, which for X pizzas is 6*X. The total revenue earned in selling X pizzas is 10*X
Profit = revenue earned - cost incurred
=> 60000 = 10*X - 54000 - 6*X
=> 4*X = 114000
=> X = 114000/4
=> X = 28500
A total of 28500 pizzas must be sold to make a profit of $60000