Meaning of contribution margin in layman terms

Reference no: EM13154351

Vince's Pizza delivers pizzas to dormitories and apartments near a major state university. The company's annual fixed costs are $48,000. The sales price averages $9, and it costs the firm $3 to make and deliver each pizza.

Required:

A. How many pizzas must Vince's sell to break even?

B. How many pizzas must the company sell to earn a target net profit of $54,000?

C. If budgeted sales total 9,900 pizzas, how much is the company's safety margin?

D. Vince's assistant manager, an accounting major, has suggested that the firm should try to increase the contribution margin per pizza. Explain the meaning of "contribution margin" in layman's terms.

Reference no: EM13154351

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