Question

Suppose a pizza parlor has the following production costs: $4.00 in labor per pizza, $3.00 in ingredients per pizza, $0.10 in electricity per pizza, $3,000 in restaurant rent per month, and $550 in insurance per month. Assume the pizza parlor produces 8,000 pizzas per month. What is the variable cost of production (per month)? The variable cost of production is $ 56,800. (Enter your response as an integer.) What is the fixed cost of production (per month)? The fixed cost of production er your response as an integer.)

Answer 1

1)

The variable cost of production per month = 4*8000 + 3*8000 + 0.10*8000 = 56800

The fixed cost of production per month = 3000+550 = 3550

Answer 2

Answering the last question,

Labor	capital	Output	Total variable cost	Total fixed cost	Total cost = TVC+TFC
0	1	0	0	$350	$350
1	1	40	$160	$350	$510
2	1	120	$320	$350	$670
3	1	160	$480	$350	$830
4	1	180	$640	$350	$990
5	1	190	$800	$350	$1150

 

Here per variable factor cost = $160

Therefore total variable cost = Number of variable factor*cost of per variable factor

And since fixed cost = $350 and fixed factor is 1

Therefore total fixed cost = $350*1 = $350