Question

Suppose a pizza parlor has the following production​ costs: ​$5.00 in labor per​ pizza, ​$4.00 in ingredients per​ pizza, ​$0.80 in electricity per​ pizza, ​$3,000 in restaurant rent per​ month, and ​$550 in insurance per month. Assume the pizza parlor produces 3 comma 0003,000 pizzas per month. What is the variable cost of production​ (per month)? The variable cost of production is ​$nothing. ​(Enter your response as an​ integer.)

Answer 1

Answer:

The variable cost of the production amounts to $29,400

Explanation:

Variable costs are those kind of expenses which changes as the quantity of the good as well as the service that produces by business changes.

The variable cost of the production is computed as:

Variable cost = Labor cost per pizza + ingredients cost per pizza + Electricity cost per pizza

where

Labor cost per pizza is $5.00

Ingredients cost per pizza is $4.00

Electricity cost per pizza is $0.80

Putting the values above:

Variable cost = $5.00 + $4.00 + $0.80

Variable cost = $9.00 + $0.80

Variable cost = $9.80

Now, computing the variable cost of production as:

Variable cost of production = Variable cost × Pizza produces per month

Variable cost of production = $9.80 × 3,000

Variable cost of production = $29,400