Question

A restaurant sells pizza for $11.98/slice. Expenses for the restaurant include raw material for pizza at $6.98 per slice, $192.00 as monthly rental and $59.00 as monthly insurance. How many slices should the restaurant sell in a month to break even? Don't round to whole slices.

Answer 1

To determine the number of pizza slices the restaurant needs to sell in a month to break even, we first need to calculate the total fixed costs and the contribution margin per slice.

1. **Calculate the total fixed costs**:
- Monthly rental: $192.00
- Monthly insurance: $59.00
- Total Fixed Costs = Monthly Rental + Monthly Insurance
\[
\text{Total Fixed Costs} = 192.00 + 59.00 = 251.00
\]

2. **Calculate the variable costs per slice**:
- Raw material cost per slice: $6.98

3. **Calculate the selling price per slice**:
- Selling price per slice: $11.98

4. **Calculate the contribution margin per slice**:
- Contribution Margin = Selling Price - Variable Cost
\[
\text{Contribution Margin} = 11.98 - 6.98 = 5.00
\]

5. **Determine the break-even point in slices**:
- The break-even point in units (slices) is calculated using the formula:
\[
\text{Break-even Point} = \frac{\text{Total Fixed Costs}}{\text{Contribution Margin}}
\]
\[
\text{Break-even Point} = \frac{251.00}{5.00} = 50.2
\]

Therefore, the restaurant needs to sell **50.2 slices** in a month to break even.