6 Ahmed's Pizza House sells extra-large deluxe pizzas at OMR 9.000 per pizza. The cost of ingredients to make extra-large deluxe pizza is OMR 2.000. Ahmed pays each of his employees OMR 60 per day. He also incurs a fixed cost of OMR 120 per day, Calculate Ahmed's average fixed cost per day when he produces 50 extra-large deluxe pizzas using two workers? AFCXO
Answer -
Given in the question -
Price of extra-large Deluxe pizza = OMR 9.00
Cost of Ingredients to make extra-large Deluxe pizza = OMR 2.00
Payment of each employee = OMR 60
Total No. of employee = 2
Fixed Cost = OMR 120
We need to find -
Average Fixed cost per day when 50 extra-large Deluxe pizza were produced
Average Fixed cost = Fixed costs are those costs that must be incurred in fixed quantity regardless of the level of output produced. Average fixed cost is the fixed costs of production divided by the quantity of output produced.
So, by definition -
Fixed cost = 120 + 2* payment of a employee
Fixed cost = 120 + 2*60
Fixed Cost = OMR 240.............(1)
Average Fixed cost per day For 50 extra-large Deluxe pizza = Fixed cost / Q
Here Q = 50
From eqn. "1"
Average Fixed cost per day For 50 extra-large Deluxe pizza = 240 /50
Average Fixed cost per day For 50 extra-large Deluxe pizza = OMR 4.8
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