Question
The owner of New York Restaurant is disappointed because the restaurant has been averaging 6,000 pizza sales per month, but the restaurant and wait
The owner of New York Restaurant is disappointed because the restaurant has been averaging 6,000 pizza sales per month, but the restaurant and wait staff can make and serve 7,500 pizzas per month. The variable cost (for example, ingredients) of each pizza is $1.40. Monthly fixed costs (for example, depreciation, property taxes, business license, and manager's salary) are $9,000 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 Total fixed costs Total variable costs Total costs 4,500 6,000 7,500 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 Total fixed costs Total variable costs Total costs Fixed cost per pizza Variable cost per pizza Average cost per pizza 4,500 6,000 7,500 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 costs. The more units they produce, the per unit the Requirement 3. The owner has been considering ways to increase the sales volume. He believes he could sell 7,500 pizzas a month by cutting the sales price from $6.25 a pizza to $5.75 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. 6,000 pizzas 7,500 pizzas Monthly profit Since the restaurant will generate of $ the owner should the sales price to the volume,
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