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Meehan assignment 4

# Meehan assignment 4 - Terry Meehan MGMT 100-E59 Assignment...

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Terry Meehan MGMT 100-E59 Assignment 4 p. 399, #3 The most important part of any business venture is being certain you will make a profit. The scenario on page 399 involves a school fund raiser where students sell pizza. When considering the profitability of this, or any, venture, one must take into consideration the break even point. This is the point where revenues are in equilibrium with costs. The break even point is calculated as follows: Break Even Point (BEP)= Total Fixed Cost (FC) _____________________________________ [Price of One Unit (P) – Variable Cost (VC)] In the example provided, the only fixed cost is the purchase price of the pizza oven, \$12,000.00. The price of one unit is the sale price, \$12.00, and the variable cost is \$6.00. Therefore, the break even point for the student run pizza selling venture is 2000 units. That is to say, the student body would have to sell 2000 pizzas just to break even. Assuming a student body of 2500 students, with approximately 25% of them actively participating in the fund raiser, the students would have to sell just over 3 pizzas each just to cover expenses.

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