"Brad Pitt is an entrepreneur who sells value meals online. He revealed to you the following data:
Selling Price P 130.00
Variable Costs:
1 Cup of Rice 6.00
A piece of chicken 25.00
Veggies 20.00
Egg 6.00
Seasoning 2.00
Other Ingredients 25.00
Packaging 10.00
Fixed Costs per month:
Depreciation 1,000.00
Electricity 5,000.00
Brad plans to reduce her price to P 120.00 to compete with other online sellers, as he has secured a supplier who would supplier her for a cheaper cost of veggies and chicken, reducing the costs per value meal from P 20.00 to P 13.00 and P 25.00 to P 20.00, respectively. Also, Brad is subject to 25% income tax on all her incomes.
Brad wants to know how many value meals should she sell to earn a net profit after tax of P10,000.00 a month.
Guide Questions:
1. What is the current breakeven sales?
2. How much is the new contribution margin per unit given the above data?
3. What is the new breakeven sales?
4. How many units should she sell to earn a net profit after tax of P 10,000.00?
5. If Brad realize to earn a net profit of P 10,000.00 a month, what is his margin of safety of Brad?
6. Using your answer in number 5, what does that mean to Brad?