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:

Congenital Hypothyroidism

A condition present at birth where the thyroid gland does not produce enough thyroid hormone, critical for growth and development.

Cretinism

A congenital condition caused by a deficiency in thyroid hormone, leading to stunted physical and mental growth.

Dwarfism

A medical or genetic condition resulting in an adult height significantly below the average.

Growth Hormone

A hormone produced by the pituitary gland that stimulates growth, cell reproduction, and cell regeneration in humans and other animals.