Question

The owner of

New YorkNew York

Restaurant is disappointed because the restaurant has been averaging

4 comma 0004,000

pizza sales per​ month, but the restaurant and wait staff can make and serve

5 comma 0005,000

pizzas per month. The variable cost​ (for example,​ ingredients) of each pizza is

$ 1.15$1.15.

Monthly fixed costs​ (for example,​ depreciation, property​ taxes, business​ license, and​ manager's salary) are

$ 4 comma 000$4,000

per month. The owner wants cost information about different volumes so that some operating decisions can be made.Read the requirements

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Requirement 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. ​(Enter 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. . . . . . . . . . . .	2,000	4,000	5,000
	Total fixed costs. . . . . . . . . . . . . . .
	Total variable costs. . . . . . . . . . . . . .
	Total costs
	Fixed cost per pizza. . . . . . . . . . . . .
	Variable cost per pizza. . . . . . . . . . .
	Average cost per pizza. . . . . . . . . . .
	Selling price per pizza. . . . . . . . . . . .	$5.75	$5.75	$5.75
	Average profit per pizza. . . . . . . . . .

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Requirements

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.
2.	From a cost​ standpoint, why do companies such as New YorkNew York Restaurant want to operate near or at full​ capacity?
3.	The owner has been considering ways to increase the sales volume. The owner thinks that 5 comma 0005,000 pizzas could be sold per month by cutting the selling price per pizza from $ 5.75$5.75 a pizza to $ 5.25$5.25. 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.)

Answer 1

Monthly Pizza Volume	2,000.00	4,000.00	5,000.00
Total Fixed Cost	4,000.00	4,000.00	4,000.00
Total Variable Cost - $1.15 per Pizza	2,300.00	4,600.00	5,750.00
Total Costs	6,300.00	8,600.00	9,750.00
Fixed Cost per Pizza	2.00	1.00	0.80
Variable Cost Per Pizza	1.15	1.15	1.15
Average Cost per Pizza	3.15	2.15	1.95
Selling Price per pizza	5.75	5.75	5.75
Average Profit per pizza	2.60	3.60	3.80