College pizza delivers pizzas to the dormitories and apartments near a major state university. the company‘s annual fixedexpenses are 540.000. the sales price of a pizza is s 10. and it costs the company s 5 to make and deliver each pizza. (inthe following requirements. ignore income taxes.)requlred: i. using the contribution-margin approach. compute the company‘s break»even point in units (pizzas)2 what is the contribution-margin ratio? 3. compute the break-even sales revenue. use the contribution-margin ratio in your calculation.4. how many pizzas must the company sell to earn a target net profit of 565000? use the equation method.

1. 108,000 pizzas

2. 50%

3. $1,080,000

4. 221,000 pizzas

Explanation:

The calculations are shown below:

1. For break even points in units

= (Annual Fixed expenses + target profit) ÷ (Contribution margin per unit)

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $10 - $5

= $5

And the other values will remain the same now place these values in the formula above.

= ($540,000) ÷ ($5)

= 108,000 pizzas

2. Contribution margin ratio

= (Contribution margin per unit ÷ Selling price per unit) × 100

= ($5) ÷ ($10) × 100

= 50%

3. Break-even sales revenue:

= Annual fixed expenses ÷ contribution margin ratio

= $540,000 ÷ 50%

= $1,080,000

4. Break even units for earns target net profit would be

= (Annual Fixed expenses + targeted net  profit) ÷ (Contribution margin per unit)

= (540,000 + $565,000) ÷ ($5)

= 221,000 pizzas

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