The Local Convenience Store Makes Personal Pan Pizzas

question 22

Essay

The local convenience store makes personal pan pizzas. Currently, their process makes complete pizzas, fully cooked, for the customer. This process has a fixed cost of $20,000, and a variable cost of $1.75 per pizza. The owner is considering a different process that can make pizzas in two ways: completely cooked (as before), or partially cooked and then flash frozen, for the customer to finish at home. This alternate process has a fixed cost of $24,000, but a lower variable cost (because much less energy is used in baking) of $1.25 per pizza.
a. What is the crossover point between the existing process and the proposed process?
b. If the owner expects to sell 9,000 pizzas, should he get the new oven?

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Definitions:

Probing Questions

Questions designed to gather more detailed information, encourage deeper discussion, or explore underlying issues.

Probing

The process of gathering information or insight through questions, experiments, or exploration.

Customer Needs

The specific desires, requirements, or preferences of customers that businesses strive to meet with their products or services.

Questions

Questions are inquiries made to obtain information, clarify doubts, or explore deeper into a subject.