Question 20 (of 22)> Save & Exit l | Submit Time remaining: 1:27:39 20 The Groov

ID: 2593385 • Letter: Q

Question

Question 20 (of 22)> Save & Exit l | Submit Time remaining: 1:27:39 20 The Groovy Movie Chains has invested in Italian snack bars for their stores, where individual pizzas are prepared and sold. The investment cost the company $60,000. The company expects a sales volume for the new product to be 12,000 pizzas a year. Variable materials, preparation, and marketing costs are expected to be $2.25 a unit and fixed costs are estimated at $24,000 a year. Based on a desired 12% ROI, what should Groovy Movies charge as the selling price per pizza? (Round your final answer to 2 decimal places.) O $3.35 O $4.25 O $4.85 O $6.85

Explanation / Answer

Answer:

Selling price per PIZZA =$ 4.85

Working notes for the answer:

Let's assume that the selling price per pizza is $X

Sales =

12000x

Less: variable cost=((12000*$2.25=$27000))

-27000

contribution

,=12000x-27000

Less:Fixed cost=

($24,000)

Net profit

,==$12000X -$51000

ROI= Net revenue- net cost

12 %(60,000) = $12000X - $51000

7200 =$12000X - $51000

7200+51000=12000x

x =58200/12000

$ = $12000X

X= $4.85

SELLING PRICE PER PIZZA = $4.85