CVP_Pizza+Business_Question

You believe that by spending a further r10000 on

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Unformatted text preview: lieve that by spending a further R10,000 on advertising you will increase sales units by 10%. c. The annual utility costs are expected to behave in the following way in relation to the number of pizzas made: Expected number of pizzas Total annual utility costs 7 000 R13 000 7 400 R14 000 7 500 R13 500 Required: 1. How many pizzas must be sold per year to break-even? 2. Compute the margin of safety. Interpret your result. (3 marks) 3. Compute the degree of operating leverage at the current conservative level of expected sales. What does this mean? (5 marks) 4. Should you spend a further R10 000 on advertising if it will increase sales units by 10% from current expected levels? (4 marks) Compiled by Colin C Smith 2013 (11 marks)...
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