Problem 2: Part 1: A pizza restaurant is opening a new branch. They can buy a small oven that can handle 20 pizzas per hour or a large oven that can handle 40 pizzas per hour. The small oven has fixed costs of $20,000 and variable costs of $2.00 per pizza. The large oven has fixed costs of $30,000 and variable costs of $1.25 per pizza. Pizzas sell for $12 per pizza. a) What is the break even point for the small oven in terms of pizzas? b) How many days are needed to break even with the small oven assuming that they operate ten hours a day at maximum capacity? c) What is the break even point for the large oven? Problem 2: Part 2: The owner is uncertain of the demand that will occur at each branch. In order to understand the situation further, he decides to look at the demand over one month. He assumes that in one month the restaurant is open for 300 hours total. a) What is the maximum capacity for the small oven in one month? b) What is the maximum capacity for the large oven in one month? Problem 2: Part 3: The owner further assumes that if demand is low there will only be requests for 4000 pizzas per month. If the demand is high then there will be requests for 7500 pizzas per month. a) Complete the following table with the profits in the different demand scenarios. Demand Profit Small Oven Profit Large Oven 4000 7500 Problem 2: Part 3: (Continued) b) Assuming that there is a 0.3 chance of low demand (4000 pizzas), draw a decision tree illustrating the possible alternatives and states of nature along with the payoffs for this situation -- clearly label all nodes, branches, and payoffs. c) Compute the EMV for both alternatives. d) Based on the EMV, which oven should the pizza shop owner invest in and why? Problem 2: Part 3: (Continued) e) The oven company is offering to conduct a market study for the pizza restaurant in order to advise on the oven size that will suit the demand needs the best. Purchasing this market study will cost the restaurant a one time fee of $1500. Should the restaurant agree to purchasing the market study? Why or why not