Assignment:
John Cook, the owner of Extra Pizza restaurant, is considering a new oven in which to bake the restaurant's signature dish, vegetarian & seafood pizza. Oven type A can handle 20 pizzas an hour. The fixed costs associated with oven A are $30,000 and the variable costs are $2.25 per pizza. Oven B is larger and can handle 50 pizzas an hour. The fixed costs associated with oven B are $50,000 and the variable costs are $1.50 per pizza. The pizzas sell for $15.00 each.
a) What is the Break-Even Point (BEP) for each oven?
b) If the owner of this restaurant expects to sell 10,000 pizzas, which oven system are you going to recommend?
c) If the owner of this restaurant expects to sell 50,000 pizzas, which oven system should he/she purchase?
d) At what volume, should the owner of this restaurant switch ovens to maximize the profit?