The management of Rocko\'s Pizzeria is considering a special promotion for the l

Question

The management of Rocko's Pizzeria is considering a special promotion for the last two weeks of October, which is normally a relatively low-demand period. The special promotion would involve selling two medium pizzas for the price of one, plus 1 cent. The medium pizza normally sells for $12.99 and has variable expenses of $4.50. Expected sales volume without the special promotion is 600 medium pizzas per week. Required: (a) Calculate the total contribution margin generated by the normal volume of medium pizzas in a week. (Do not round your intermediate calculations. Omit the "$" sign in your response.) Contribution margin $ (b) Calculate the total number of medium pizzas that would have to be sold during the 1-cent sale to generate the same amount of contribution margin that results from the normal volume. (Do not round your intermediate calculations.)

Explanation / Answer

Under the promotion deal, a pair of mediums will fetch $13 total, or $6.5 per on average. No reason to expect the unit variable costs to change, so each pizza will generate a unit contribution margin of ? And so then, how many pizzas in total must be sold to garner total contribution margin of $5,094? Or equivalently, each pair of mediums will have revenue of $13 and variable costs of $9. So how many pairs must be sold to generate total contribution margin of $5,094? (Then multiply the number of pairs by two to derive the number of individual pizzas.)

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