Mike Solid started a pizzeria in 1999. For this purpose he rented a building for $1,800 per month. Two persons were hired to work full-time at the restaurant and six college students were hired to work 30 hours per week delivering pizza. An outside accountant was hired for tax and bookkeeping purposes at a cost of $900 per month. The necessary restaurant equipment and delivery cars were purchased with cash. Mr. Solid has noticed that expenses for utilities and supplies have been rather constant. Mr. Solid increased his business between 1999 and 2001. Profits have more than doubled since 1999. Mr. Solid does not understand why his profits have increased faster than his volume. A projected income statement for 2002 has been prepared by the accountant and is shown below: Projected Income Statement For the Year Ended December 31, 2002 Sales $308,000 Cost of food sold $92,400 Wages & fringe benefits of restaurant help Wages & fringe benefits of delivery persons 26,650 54,100 Rent 15,500 Accounting services Depreciation of delivery equipment Depreciation of restaurant equipment 10,900 16,000 8,000 7,165 Utilities Supplies (soap, floor wax, etc.) 10,645 241,360 Income before taxes 66,640 Income taxes 19,992 Net Income $ 46,648 Note: The average pizza sells for $8.50. Assume that Mr. Solid pays out 30 percent of his income in income taxes.
Mike Solid started a pizzeria in 1999. For this purpose he rented a building for $1,800 per month. Two persons were hired to work full-time at the restaurant and six college students were hired to work 30 hours per week delivering pizza. An outside accountant was hired for tax and bookkeeping purposes at a cost of $900 per month. The necessary restaurant equipment and delivery cars were purchased with cash. Mr. Solid has noticed that expenses for utilities and supplies have been rather constant. Mr. Solid increased his business between 1999 and 2001. Profits have more than doubled since 1999. Mr. Solid does not understand why his profits have increased faster than his volume. A projected income statement for 2002 has been prepared by the accountant and is shown below: Projected Income Statement For the Year Ended December 31, 2002 Sales $308,000 Cost of food sold $92,400 Wages & fringe benefits of restaurant help Wages & fringe benefits of delivery persons 26,650 54,100 Rent 15,500 Accounting services Depreciation of delivery equipment Depreciation of restaurant equipment 10,900 16,000 8,000 7,165 Utilities Supplies (soap, floor wax, etc.) 10,645 241,360 Income before taxes 66,640 Income taxes 19,992 Net Income $ 46,648 Note: The average pizza sells for $8.50. Assume that Mr. Solid pays out 30 percent of his income in income taxes.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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What is the break-even point in number of pizzas that must be sold and the
Transcribed Image Text:Mike Solid started a pizzeria in 1999. For this purpose he rented a building for $1,800 per
month. Two persons were hired to work full-time at the restaurant and six college students were
hired to work 30 hours per week delivering pizza. An outside accountant was hired for tax and
bookkeeping purposes at a cost of $900 per month. The necessary restaurant equipment and
delivery cars were purchased with cash. Mr. Solid has noticed that expenses for utilities and
supplies have been rather constant. Mr. Solid increased his business between 1999 and 2001.
Profits have more than doubled since 1999.
Mr. Solid does not understand why his profits have increased faster than his volume.
A projected income statement for 2002 has been prepared by the accountant and is shown
below:
Projected Income Statement
For the Year Ended December 31, 2002
Sales
$308,000
Cost of food sold
$92,400
Wages & fringe benefits of restaurant help
Wages & fringe benefits of delivery persons
26,650
54,100
Rent
15,500
Accounting services
Depreciation of delivery equipment
Depreciation of restaurant equipment
10,900
16,000
8,000
Utilities
7,165
Supplies (soap, floor wax, etc.)
10,645
241,360
66,640
19,992
$ 46,648
Income before taxes
Income taxes
Net Income
Note: The average pizza sells for $8.50. Assume that Mr. Solid pays out 30 percent of his income in income taxes.
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