Janelle Heinke, the owner of Ha\'Peppas!, is considering a new oven in which to

Question

Janelle Heinke, the owner of Ha'Peppas!, is considering a new oven in which to bake the firm's signature dish, vegetarian pizza. Oven type A can handle 24 pizzas an hour. The fixed costs associated with oven A are $20, 000 and the variable costs are $2.50 per pizza. Oven B is larger and can handle 42 pizzas an hour. The fixed costs associated with oven B are $32, 500 and the variable costs are $1.00 per pizza. The pizzas sell for $14.00 each. The break-even point in units for oven type A = units (round your response to the nearest whole number). The break-even point in units for oven type B = units (round your response to the nearest whole number). If Janelle is expecting that the pizza shop is going to be able to sell 8, 000 pizzas, then she should select oven If Janelle is expecting that the pizza shop is going to be able to sell 14, 000 pizzas, then she should select oven The volume at which Oven A and Oven B have the same cost (crossover point) and Janelle would be indifferent = pizzas (round your response to the nearest whole number).

Explanation / Answer

Question:
Janelle Heinke,the owner of Ha'Peppas,is considering a new oven in which to bake the firm,s signature dish ,Vegetarian pizza.Oven A can handle 24 pizzas an hour.The fixed cost associated with oven A are $20000 and the variable costs are $2.50 per pizza.Oven B is larger and can handle 42 pizzas pizzas in an hour.The fixed cost associated with Oven B are $32500 and the variable costs are $1.00 per pizza.The pizzas sell for $14 each.

a.)The break even point in units for Oven type A=_______units(round your response to the nearest whole number).
The break even point in units for Oven type B=_______units(round your response to the nearest whole number).
b.)If Janelle is expecting the pizza shop is going to be able to sell 8,000 pizzas,then she should select Oven ______.
c.)If Janelle is expecting the pizza shop is going to be able to sell 14,000 pizzas,then she should select Oven ______.
d,)The volume at each oven A and Oven B have the same cost(crossover point) and janelle would be indifferent=________pizzas(round your response to the nearest whole number).

Answer a.) Break even point in units= Fixed costs
___________________________________
Sales price per unit-variable cost per unit

Break even point in units for oven A= 20000
­­­­­­­ _____________
14-2.50
=1740.

Break even point in units for oven B= 32500
­­­­­­­­­­­­­­­­ _____________
14-1.00
= 2500 units

b.)Oven A is profitable because it's earn more profit then oven B .
We know profit = Total Revenue- Total Cost.
so,for oven A profit=(8000*14)-(20000+2.50*8000)=72000
for OVen B is (8000*14)-(32500+1.00*8000)=71500.

c.) Oven B is profitable because it's earn more profit then oven A .
Profit=TOtal Revenue-Total Cost
For Oven A= (14000*14)-(20000+2.5*14000)
=141,000
For Oven B=(14000*14)-(32500+1.00*14000)
=149,500.
d.)The volume at each oven A and Oven B have the same cost(crossover point) and janelle would be indifferent=
Difference in Fixed cost/Difference in variable cost
=32500-20000/2.50-1.00
=8,333.333 units or 8334 units.

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