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Question Description
read the 2nd chapter The Nature of costs in the attached textbook and answer the problem P-12 at the end of chapter 2
Gino Potestio, owner of Napoli Pizzeria, is evaluating leasing an espresso/cappuccino machine.A number of patrons have inquired about espresso and cappuccino beverages. Napoli currently does not offer these beverages. Gino believes adding these beverages will increase thedemand for his pizzas. A good espresso/cappuccino machine can be leased for $300 month. Eachespresso/cappuccino will sell for $3 and the coffee and milk will average $1 per serving. Noadditional labor cost is needed because the restaurant staff has enough idle time to prepare andserve the espresso/cappuccino. Gino estimates that the machine will add about $75 of additionalpizza profits per month.Required:a. How many espresso/cappuccino beverages must Napoli sell to break even?b. Gino doesn’t want to offer espresso/cappuccino beverages unless he makes at least $1,000per month after taxes including the additional sales of pizzas from adding espresso/cappuccino beverages. Napoli’s income tax rate is 35 percent. How many servings ofespresso/cappuccino must Gino sell to meet his after tax profit goal?
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