Edward Cheezer's Makes and Sells Frozen Four-Cheese Pizzas, New York-Style

question 136

Multiple Choice

Edward Cheezer's makes and sells frozen four-cheese pizzas, New York-style. The expected selling price is $10 per pizza. The projected variable cost per pizza is $6. The estimated fixed costs per month are $10,000. If 6,000 pizzas are sold in a given month and fixed costs increase by $5,000, the overall profit is

• A) $15,000.
• B) $19,000.
• C) $20,000.
• D) $9,000.

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Definitions:

Opportunity Cost

The cost of an alternative that must be forgone in order to pursue a certain action or the benefits you miss out on when choosing one alternative over another.

Best Alternative

The Best Alternative usually refers to the most favorable option or choice that is available to an individual or organization from a set of possibilities.

Benefits

Forms of compensation provided to employees or the public, including health insurance, pension, and unemployment assistance.

Opportunity Cost

The cost of what is forgone in order to pursue a certain action; the value of the best alternative option that is not selected.