The owner of New Jersey Restaurant is disappointed because the restaurant has been averaging 4,000 pizza sales per month, but the restaurant and wait staff can make and serve 6,000 pizzas per month. The variable cost (for example, ingredients) of each pizza is $1.25. Monthly fixed costs (for example, depreciation, property taxes, business license, and manager's salary) are $6,000 per month. The owner wants cost information about different volumes so that he can make some operating decisions. Requirements Requirement 1. Fill in the chart to provide the owner with the cost information he wants. Then use the completed chart to help you answer the remaining questions. (Round total variable costs to the nearest dollar. Round costs per pizza, price per pizza, and profit per pizza to the nearest cent.) Monthly pizza volume 3,000 4,000 6,000 Requirements Total fixed costs Total variable costs Total costs 1. Fill in the chart to provide the owner with the cost information he wants. Then use the completed chart to help you answer the remaining questions. 2. From a cost standpoint, why do companies such as New Jersey Restaurant want to operate near or at full capacity? 3. The owner has been considering ways to increase the sales volume. He believes he could sell 6,000 pizzas a month by cutting the sales price from $6.00 a pizza to $5.50. How much extra profit (above the current level) would he generate if he decreased the sales price? (Hint: Find the restaurant's current monthly profit and compare it to the restaurant's projected monthly profit at the new sales price and volume.) Fixed cost per pizza Variable cost per pizza Average cost per pizza Print Done Sales price per pizza 6.00 $ 6.00 $ 6.00 Average profit per pizza Requirement 2. From a cost standpoint, why do companies such as New Jersey Restaurant want to operate near or at full capacity? Companies want to run at full capacity to better utilize the resources they spend on costs. The more units they produce, the the cost per unit. Requirement 3. The owner has been considering ways to increase the sales volume. He believes he could sell 6,000 pizzas a month by cutting the sales price from $6.00 a pizza to $5.50. How much extra profit (above the current level) would he generate if he decreased the sales price? (Hint. Find the restaurant's current monthly profit and compare it to the restaurant's projected monthly profit at the new sales price and volume.) Identify the profit formula and compute the monthly profit at the current and the new volume. Monthly profit 4,000 pizzas 6,000 pizzas Since the restaurant will generate V of $, the owner should the sales price to the volume
