As an entrepreneur, there are going to be many decisions that you need to make, such as the price to charge your customers for your goods and services. You have just graduated from college and recently opened a specialty pizza restaurant. Based on surveys conducted in your area, you determine that it is feasible to sell your specialty pizzas for $15. The cost for making the pizzas includes a fixed cost of $55 and a labor cost of $4 per pizza.

Question

As an entrepreneur, there are going to be many decisions that you need to make, such as the price to charge your customers for your goods and services. You have just graduated from college and recently opened a specialty pizza restaurant. Based on surveys conducted in your area, you determine that it is feasible to sell your specialty pizzas for $15. The cost for making the pizzas includes a fixed cost of $55 and a labor cost of $4 per pizza.

a. Establish an equation to determine revenue.
b. Establish an equation to determine total cost.
c. How many pizzas must be sold to break even (i.e., you experience neither a profit nor a loss)? Interpret your result.

Answer 1

for x pizzas,

revenue = 15x
cost = 55 + 4x

break-even when revenue = cost

15x = 55 + 4x
x = 5
so, sell more than 5 pizzas to make a profit.

Answer 2

The company would need to sell more 75.00 to make a profit and break even

Answer 3

a. To determine the revenue, we need to multiply the price per pizza by the number of pizzas sold. Let's call the number of pizzas sold "x". The price per pizza is $15. Therefore, the revenue equation can be written as:

Revenue = price per pizza * number of pizzas sold
Revenue = 15x

b. To determine the total cost, we need to add the fixed cost and the variable cost per pizza multiplied by the number of pizzas sold. The fixed cost is $55 and the labor cost per pizza is $4. Therefore, the total cost equation can be written as:

Total cost = fixed cost + variable cost per pizza * number of pizzas sold
Total cost = 55 + 4x

c. To break even, the revenue must be equal to the total cost. Therefore, we can set the revenue equation equal to the total cost equation and solve for "x":

Revenue = Total cost
15x = 55 + 4x

To solve for "x", we can subtract 4x from both sides of the equation:
15x - 4x = 55
11x = 55

Divide both sides of the equation by 11:
x = 55/11
x = 5

Interpretation: To break even, or experience neither a profit nor a loss, you need to sell 5 pizzas. This means that the total revenue generated from selling 5 pizzas will be equal to the total cost incurred in making and selling those 5 pizzas.