Cvp of Pizza Hut

Since our company’s main focus is premium products we will aim for high contribution margins, around 50%, on average, over all five products. After establishing our company brand and products within the market we will look to increase contribution margin to be between 55%-60% over all five products.

New Contribution Margin = New Price per unit – Variable cost per unit =$8.5-$2.5 =$6

8.20 equals $ 86,700. The contribution margin per unit at a retail price of Cr. 6.85 equal 1.95. The required volume will be the result of dividing the profit impact on the contribution margin per unit.

Note: You can assume that variable costs are constant so that the average of them is the variable cost relevant for a change in sales.

13. If the selling price is $22 per unit, what is the contribution margin per unit sold?

Because each product has a different contribution margin percentage, the volume required for each break-even point would be different and will not add up to the company’s overall break-even volume of 1,100,000 units; the overall break-even volume assumes that there is only one contribution margin percentage which is :

According to, Skills for Business Decisions, “Cost-volume-profit (CVP) analysis examines changes in profits in response to changes in sales volumes, costs, and prices.” (Kimmel P.D. 2009) A company’s profit is the CVP profit equation of Profit = Revenue – Expenses. A Cost-volume-profit (CVP) analysis consists of five basic components that include:

Contribution Margin = (Unit selling price – unit variable cost) / unit selling price = ($9.00 – $2.60) / $9.00 = 0.7111 = 71.111%

Using $8.50 as the variable cost provided at the bottom of the case study and using $39.95 as the retail selling price as compared to $23.97 as the wholesale selling price (60% of the retail price), ServiSoft will realize a contribution margin of $31.45 with the retail distribution channel versus $15.47 with the wholesale distribution channel.

As, in this case study as the total revenue is $22,500,000 and the total events is 5000 events therefore revenue per event is $4,500 ($22,500,000/5000), therefore, the contribution margin per event is $1,900 ($4,500 - $2,600) and as the contribution margin ratio is contribution margin/revenue; therefore the contribution margin in this case is 42% ($1,900/$4,500).

He has also assumed that the sales mix will remain constant. Total revenue and total expenses behave in a linear manner over the relevant range

The Gross profit margin stays relatively constant at around 36 %. However, there is a slight rise from 2000 to 2004.

In vertical analysis, it is easier to see elements as a percentage of Revenue. Between 2011-12, the portion that cost of sales takes in revenue has increased however, there is a bigger deterioration in distribution cost. In 2011, 9.21% of revenue remains as profit but in 2012 this figure decreases to 8.14%. Despite reduction in costs is one of the strategies of Ted Baker(part 1.4), analysis illustrates that costs increase each year.

To determine contribution margin per unit I used, 1,728,000 / 12,000 = $144 per visit. This is based on the average contribution margin, as some customers will eat, drink and use the internet and some customers will just use the internet.

Some of the assumptions of CVP as outlined by accountingformanagenment are: selling price is constant regardless of volume change, costs are linear, with multi-products the sales mix is constant, and manufacturing companies inventories do not change (N.D.). Because of the assumptions