3- The owner of Yoders Restaurant is disappointed because the restaurant has been averaging 8,000 pizza sales per month but the restaurant and wait staff can make and serve 10,000 pizzas per month. The variable cost (for example, ingredients) of each pizza is $1.45. Monthly fixed costs (for example, depreciation, property taxes, business license, managers salary) are $10,000 per month. The owner wants cost information about different volumes so that some operating decisions can be made.

Requirements

1. Fill in the chart to provide the owner with the cost information. Then use the completed chart to help you answer the remaining questions.

Monthly pizza volume	$5,000	$8,000	$10,000
Total fixed costs
Total variable costs
Total costs
Fixed cost per pizza
Variable cost per pizza
The average cost per pizza
Selling price per pizza	$6.25	$6.25	$6.25
Average profit per pizza

2. From a cost standpoint, why do companies such as Yoders Restaurant want to operate near or at full capacity?

3. The owner has been considering ways to increase the sales volume. The owner thinks that 10,000 pizzas could be sold per month by cutting the selling price from $6.25 per pizza to $5.75. How much extra profit (above the current level) would be generated if the selling price were to be decreased? (Hint: Find the restaurants current monthly profit and compare it to the restaurants projected monthly profit at the new sales price and volume.)