Question

The owner has been considering ways to increase the sales volume. The owner thinks that 10 comma 000 pizzas could be sold per month by cutting the selling price per pizza from $ 5.50 a pizza to $ 5.00. How much extra profit​ (above the current​ level) would be generated if the selling price were to be​ decreased? (Hint: Find the​ restaurant's current monthly profit and compare it to the​ restaurant's projected monthly profit at the new sales price and​ volume.) Identify the profit formula and compute the monthly profit at the current and the new volume. Total revenues – Total costs = Monthly profit 5,000 pizzas 13750 – 8000 =

Answer 1

Answer:

Instructions are listed below

Explanation:

Giving the following information:

The owner thinks that 10,000 pizzas could be sold per month by cutting the selling price per pizza from $ 5.50 a pizza to $ 5.00.

Total revenues – Total costs = Monthly profit 5,000 pizzas 13750 – 8000 =

I will assume that at $5.50 the total sales in units are 5000. And that the variable cost per unit is $2.75 ($13750/5000) and fixed cost are $8000

Actual profit= (5000*5.5- 5000*2.75) - 8000= $5750

New price profit= (10000*5 - 10000*2.75) - 8000= $14500