The Local Convenience Store Makes Personal Pan Pizzas

question 52

Essay

The local convenience store makes personal pan pizzas.Currently,its 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 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 $1.25 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:

Commodity Procurement

The process of sourcing and acquiring raw materials or basic goods that are essential for the production of other goods or services.

Managing Suppliers

The process of working effectively with third-party organizations that provide goods and services, to ensure they meet the project's quality, timeline, and budget requirements.

Performance Specifications

Descriptions of the operational requirements and the standards to which a product, service, or project must adhere.

Administrative Function

The tasks related to managing an organization's internal operations, such as record keeping, payroll, and compliance.