DDs Pizza 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 using a new oven, but a lower variable cost (because much less energy is used in baking) of $1.25 per pizza. What is the crossover point between the existing process and the proposed process? If the owner expects to sell 9,000 pizzas, should he get the new oven?
DDs Pizza 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 using a new oven, but a lower variable cost (because much less energy is used in baking) of $1.25 per pizza. What is the crossover point between the existing process and the proposed process? If the owner expects to sell 9,000 pizzas, should he get the new oven?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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DDs Pizza 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 using a new oven, but a lower variable cost (because much less energy is used in baking) of $1.25 per pizza.
What is the crossover point between the existing process and the proposed process?
If the owner expects to sell 9,000 pizzas, should he get the new oven?
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