Question - Big Al's Pizza Emporium, a subsidiary of Big Al's Pizza, Inc., has decided to sell frozen pizzas in its restaurants. Restaurant customers will take these pizzas home and cook them. The restaurants will sell frozen meat pizzas for $10 and frozen veggie pizzas for $11.50.
Although the restaurants would like to purchase the pizzas from Big Al's Pizza, Inc., Big Al's Pizza Emporium has found an unrelated supplier that will provide the meat pizzas for $4.55 and veggie pizzas for $5.75. Assume that Big Al's Pizza, Inc. has excess capacity and can supply the frozen pizzas to Big Al's Pizza Emporium Part Ten - Purchase Decision
A. Calculate at what price should Big Al sell the frozen pizzas to Big Al's Emporium?
B. Comment as to whether Big Al should sell the pizzas to Big Al's emporium or if Big Al's emporium should buy them from the unrelated supplier. Support your answer.