What costs are relevant when determining how many pizzas a month Stellar Pizza must sell to break even?

Pizza-making robotic machine
Source: Stellar Pizza

Stellar Pizza has a pizza-making robotic machine that was built by three former SpaceX engineers. More than 23 former SpaceX employees work at Stellar Pizza. The pizza-making robot can produce a pizza every 45 seconds. A pizza can be customized, baked, and topped in less than five minutes by the robotic machine.

Stellar Pizza will be in operation in the spring of 2022 in Los Angeles. The pizza-making robot will fit into the back of a truck.

View this video (3:36 minutes) that shows the Stellar Pizza robotic machine in action.

Questions

  1. Make a list of all the costs you can think of that Stellar Pizza would incur once it starts operations in Spring 2022. Use the video as inspiration – and think about the costs that a restaurant and delivery service would incur.
  2. From the list you made in Question #1, what costs would you classify as variable with respect to the cost of a Stellar pizza?
  3. From the list you made in Question #1, what costs would you classify as fixed with respect to the cost of a Stellar pizza?
  4. How would you calculate the monthly quantity of pizzas to be sold by Stellar Pizza to breakeven? What specific costs would be included in the numerator and denominator of the breakeven formula?

Copyright 2022 Wendy M. Tietz, LLC

About Dr. Wendy Tietz, CPA, CMA, CSCA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Education.

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