5. a pizza parlor has the following production costs: $2.00 in labor per pizza,

Question

5. a pizza parlor has the following production costs: $2.00 in labor per pizza, $4.00 in ingredients per pizza, $0.20 in electricity per pizza, $2,000 in restaurant rent per month, and $200 in insurance per month. Assume the pizza parlor produces 4,000 pizzas per month.

What is the variable cost of production (per month)? The variable cost of production is $ . (Enter your response as an integer.)

What is the fixed cost of production (per month)? The fixed cost of production is $ . (Enter your response as an integer.)

Explanation / Answer

1) The variable cost of production is $ 24,800

Working: ($2.00 + $4.00 + $0.20) * 4,000 = $24,800

2) The fixed cost of production is $2,200

Working: $2,000 + $200 = $2200

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