The Local Convenience Store Makes Personal Sized Pizzas

question 211

Essay

The local convenience store makes personal sized pizzas. Currently, its process makes complete pizzas, fully cooked, for the customer. This process has a fixed cost of $18,000, and a variable cost of $1.85 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 heating 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 $1.05 per pizza.
(a) What is the crossover point between the existing process and the proposed process?
(b) If the owner expects to sell 7,000 pizzas, should he get the new oven?

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Definitions:

Similar Status

A condition or situation where individuals or groups have equivalent positions, rank, or social standing within a society.

Shared Identity

A collective sense of belonging to a group, where members recognize common traits, experiences, or purposes, fostering unity and solidarity.

Social Category

A group of people who share a common characteristic or attribute but do not necessarily interact with one another.

Triads

A type of organized crime syndicate in China and in countries with significant Chinese populations.