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The owner of Brooklyn Restaurant is disappointed because the restaurant has been averaging 5,000 pizza sales per month but the restaurant and wait staff can make and serve 10,000 pizzas per month. The variable cost (for example, ingredients) of each pizza is $1.20. Monthly fixed costs (for example, depreciation, property taxes, business license, manager's salary) are $5,000 per month. The owner wants cost information about different volumes so that he can make some operating decisions.
Monthly pizza volume 2,500 5,000 10,000
Total fixed costsTotal variable costsTotal costs
Fixed cost per pizzaVariable cost per pizzaAverage cost per pizza
Sales price per pizza $5.50 $5.50 $5.50Average profit per pizza
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On the problems you just completed for me, how did you come up with the cost price to the retailer of $7.11? I understand the profit margin is 40% so wouldn't that mean that 9.95*.60=5.97 would be the cost to retailer?
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