Question

The owner of New Jersey Restaurant is disappointed because the restaurant has been averaging 4.000 pezas per month, but the restaurant and wait staf.com make and serve 6.000 per month Themable cost for example, ingredients of each purais 51.25. Monthly feed costs for example, detin property ws, business license and manager's salary are 35.000 per month. The owner wants cost information about different volumes so that some operating decisions can be Requirement 1. Use the chart below to provide the owner with the cost information. Then the completed chart to help you are the remaining questions varale che nearest dolar Eneros per a properes and proper para to temorest cert) 4.000 A cost per 5 603 Average proper Requirement 2. From a co standpoint, why do companies such as we want to operaterul cach? Companies want to radily to better the sources they spend on Requirements. The owner been considering ways to increase the sales volume. The owner thinks that 5.000 pers could be sold per money by cung selling price per pauzation 800 az 5550. How much tra profesore the current level would be greeting price were to be decrease it. Find the retranscumentary and compare restris projected my pro the new price and volume) Idently the proforma and compute the monthly profiterent and the new More os the cor should Chocoto any or anyone to the contention

Answer 1

Solution to Requirement 1:

Cost information:

Monthly pizza volume	3,000	4,000	6,000
Total fixed costs	$6,000	$6,000	$6,000
Total variable costs (@$1.25 per pizza)	$3,750	$5,000	$7,500
Total costs	$9,750	$11,000	$13,500
Fixed cost per pizza	$2.00	$1.50	$1.00
Variable cost per pizza	$1.25	$1.25	$1.25
Average cost per pizza	$3.25	$2.75	$2.25
Sales price per pizza	$6.00	$6.00	$6.00
Average profit per pizza	$2.75	$3.25	$3.75

Solution to Requirement 2:

Companies want to run at full capacity to better utilize the resources they spend on fixed costs. The more units they produce, the lesser the fixed cost per unit.

Solution to Requirement 3:

Computation of monthly profit at the current and new volume:

Monthly pizza volume	4,000	6,000
	Current level	Projected level
Total fixed costs	$6,000	$6,000
Total variable costs (@$1.25 per pizza)	$5,000	$7,500
Total costs	$11,000	$13,500
Fixed cost per pizza	$1.50	$1.00
Variable cost per pizza	$1.25	$1.25
Average cost per pizza	$2.75	$2.25
Sales price per pizza	$6.00	$5.50
Average profit per pizza	$3.25	$3.25
Total profit	$13,000	$19,500

	Total monthly Sales	-	Total monthly cost	=	Monthly profit
4000 pizzas	$24,000.00	-	$11,000.00	=	$13,000.00
6000 pizzas	$33,000.00	-	$13,500.00	=	$19,500.00

Since the restaurant will generate monthly profit of $ 19,500, the owner should decrease the sales price to increase the volume.