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:

Elements Of Fraud

Elements of Fraud include the intentional misrepresentation or concealment of an important fact upon which the victim is meant to rely, and does rely, resulting in harm to the victim.

Material

Refers to the physical substances or components that are used to make or build something.

Trustee

An individual or organization that holds and administers property or assets for the benefit of a third party.

Beneficiary

An individual who receives benefits or is entitled to receive benefits from an insurance policy or trust.