Reference no: EM131433863

The owner of XtremeHotPizza restaurant, is considering a new oven in which to bake the restaurant's signature dish, vegetarian & seafood pizza. Oven type A can handle 20 pizzas an hour. The fixed costs associated with oven A are $25,000 and the variable costs are $2.15 per pizza. Oven B is larger and can handle 50 pizzas an hour. The fixed costs associated with oven B are $40,000 and the variable costs are $1.45 per pizza. The pizzas sell for $13.00 each.

(a) What is the Break-Even Point (BEP) for each oven?

(b) If the owner of this restaurant expects to sell 7,500 pizzas, which oven system are you going to recommend? (Net Profit = Total Revenue (TR) - Total Cost (TC))

(c) If the owner of this restaurant expects to sell 72,000 pizzas, which oven system should he/she purchase? (Net Profit = Total Revenue (TR) - Total Cost (TC))

(d) At what volume, should the owner of this restaurant switch ovens to maximize the profit? (Switching Point (= Cross-over Point) à where TC1 = TC2)