6. The local convenience store makes personal pan pizzas. Currently, their proce

Question

6. The local convenience store makes personal pan pizzas. Currently, their process makes complete pizzas, fully cooked, for the customer. This process has a fixed cost of $20,000, and a variable cost of $2.00 per pizza. The owner is considering a different process that can make pizzas in two ways: completely cooked (as before), or partially cooked and then flash frozen, for the customer to finish at home. This alternate process has a fixed cost of $24,000, but a lower variable cost (because much less energy is used in baking) of $1.50 per pizza.

Explanation / Answer

for breakeven

20,000 +2x = 24,000+1.5x

x=8000 pizza's

if owners's sales is more than 8000 pizza's then go for second alternative

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