Break Even in Unit and Sales Dollars. What is Contribution Margin

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You are selling pepperoni pizzas. This is your only product. You have the following costs:
Fixed Costs:
General Labor $1,500
Rent $3,000
Insurance $200
Advertising $500
Utilities $450
Total $5,650

Variable Costs per Pizza:
Flour $0.50
Yeast $0.05
Water $0.01
Cheese $3.00
Pepperoni $2.00
Total $5.56

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What is the minimum price you should charge for the pizza?

If you set your pizza sales price to be $10, what is your contribution margin?

Calculate the break-even sales units and break-even sales dollars

Describe at least THREE ways to INCREASE profit (talking in terms of break-even)

Sample Solution

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