Frankos Pizzeria has been in business for ten years. They produce frozen pizzas that they sell wholesale to grocery stores. They sell only two types of pizza: regular crust and stuffed crust (cheese in crust). Both types of pizza have the same identical toppings (pepperoni, olives, cheese, marinara sauce, and truffles), so the only difference between the two types of pizza is due to the crust. Frankos sells regular crust pizzas for $5 each and stuffed crust for $5.50 each to cover the additional cheese in the crust and the direct labor to put the cheese in the crust.

During the last year, Frankos pushed the stuffed crust pizza through advertising and had record setting stuffed crust pizza sales. However, Frankos net income was lower than it had been in past years. The CEO of Frankos, Wynona, is thinking that they may not be charging enough for the stuffed crust pizza. However, based on their previous costing methods, they have a 150% margin on both types of pizza (product cost of $2 per pizza for regular crust and $2.20 per pizza for stuffed crust). Wynona has recently heard about activity based costing and has hired you to help her get a better feel of his costs using activity based costing.

Wynona has determined that they have three items of overhead: utilities, manager salary, and maintenance. She has given you the following information regarding these overhead costs for

2022 Exhibit 1 Overhead Costs

Utilities Manager Salary Maintenance

2012 Cost $15,050 $35,000 $45,200

Driver Square Feet of Space. Units Produced Maintenance Calls

Total # of Driver 3,000 255,000 87

Wynona also gives you the following information regarding the costs associated with each type of pizza. Also she gives you information regarding the use of each cost driver. She notes that a large portion of the maintenance calls come when the extra cheese from the stuffed crust pizzas leaks out of the crust and into the pizza ovens. Exhibit 2 Costs of Pizzas

Regular Crust Stuffed Crust

Direct Materials $1.35 $1.40

Direct Labor $0.30 $0.40

Square Feet 1,200 1,800

UNITS Produced 135,000 120,000

Maintenance Calls 15 72

Wynona wants you to address the following four questions:

3. Why are there such differences between her old method and the new ABC method?

4. What price do you suggest Frankos sell their each of their pizzas? Why?

plz explain solution