The owner of Brooklyn Restaurant is disappointed because the restaurant has been averaging 5,000 pizza sales per month but the restaurant and wait staff can make and serve 10,000 pizzas per month. The variable cost (for example, ingredients) of each pizza is $1.20. Monthly fixed costs (for example, depreciation, property taxes, business license, manager's salary) are $5,000 per month. The owner wants cost information about different volumes so that he can make some operating decisions.
Monthly pizza volume 2,500 5,000 10,000
Total fixed costs
Total variable costs
Total costs
Fixed cost per pizza
Variable cost per pizza
Average cost per pizza
Sales price per pizza $5.50 $5.50 $5.50
Average profit per pizza