The owner of New York Restaurant is disappointed because the restaurant has been averaging 10,000 pizza sales per month, but the restaurant and wait staff can make and serve 12,500 pizzas per month. The variable cost (for example, ingredients) of each pizza is $1.60. Monthly fixed costs (for example, depreciation, property taxes, business license, and manager's salary) are $13,000 per month. The owner wants cost information about different volumes so that some operating decisions can be made. Read the requirements. Total fixed costs... Total variable costs 13,000 $ 10,400 13,000 $ 16,000 13,000 20,000 $ 23,400 $ 29,000 $ 33,000 Total costs Fixed cost per pizza 2.00 $ 1.30 $ 1.04 1.60 1.60 1.60 Variable cost per pizza $ 3.60 $ 2.90 $ 2.64 Average cost per pizza .. Selling price per pizza Average profit per pizza $ 6.25 $ 6.25 $ 6.25 2.65 $ 3.35 $ 3.61 Requirement 2. From a cost standpoint, why do companies such as New York Restaurant want to operate near or at full capacity? Companies want to run at full capacity to better utilize the resources they spend on fixed lower the average fixed cost per unit. costs. The more units they produce, the Requirement 3. The owner has been considering ways to increase the sales volume. The owner thinks that 12,500 pizzas could be sold per month by cutting the selling price per pizza from $6.25 a 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 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. 10,000 pizzas Total revenues Total costs Monthly profit