Practice Time: Fixed /Vanable cost Example The owner of Central Park 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, and manager's salary) are $ 10,000 per month. The owner wants cost information about different volumes so that some operating decisions can be made. 1. Use the chart below to provide the owner with the cost information. Then use the completed chart to help you answer the remaining questions. (Calculate total variable costs to the nearest dollar. Enter costs per pizza, price per pizza, and profit per pizza to the nearest cent.) Monthly Pizza Volume 5,000 8,000 10,000 Total Fixed Costs Total Variable Costs Total Costs $6.25 $6.25 $6.25 Selling Price per Pizza Fixed Cost per Pizza Variable Cost per Pizza Average Cost per Pizza Average Profit per Pizza 2. From a cost standpoint, why do companies, such as Central Park 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 restaurant's currently monthly profit and compare it to the restaurant's projected monthly profit at the new sales price and volume.)