Nick is planning on starting a mobile pizza oven. He is expecting his customers to spend $20 per pizza. It is estimated that the costs associated with the ingredients will be $5 per pizza. In addition, his fixed costs for renting the mobile oven is $150 per day. 1) How many pizzas does Nick need to sell to break-even per day? 2) If Nick wants to make a profit of $300 and sell 25 pizzas per day, calculate the price he should charge per pizza. 3) If Nick increases the price per pizza to the amount found in part (b) then explain the effect on the break-even number of pizzas sold. Assume the fixed costs and the variable costs remain unchanged.

Nick is planning on starting a mobile pizza oven. He is expecting his customers to spend $20 per pizza. It is estimated that the costs associated with the ingredients will be $5 per pizza. In addition, his fixed costs for renting the mobile oven is $150 per day. 1) How many pizzas does Nick need to sell to break-even per day? 2) If Nick wants to make a profit of $300 and sell 25 pizzas per day, calculate the price he should charge per pizza. 3) If Nick increases the price per pizza to the amount found in part (b) then explain the effect on the break-even number of pizzas sold. Assume the fixed costs and the variable costs remain unchanged.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.6IP

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