Question

Pepe, the owner of Pepe’s Pizza in New Haven, CT, is considering a new oven in which to bake the restaurants signature pizza. Oven type A can handle up to 20 pizzas per hour. The oven costs $20,000, including purchase price, insurance, and other fixed costs. The oven’s operating costs are $40 per hour for electricity and fuel. Oven B is larger and can handle up to 40 pizzas per hour. The fixed costs are $30,000 and the operating costs are $50 per hour. The pizza sells for $14 each. The cost of ingredients and labor is $5 per pizza. For each oven, how many pizzas does Pepe have to sell per hour to avoid losing money on oven operating costs? At max operating capacity, what are the breakeven sales quantities? At max operating capacity, how many pizzas must Pepe sell for Oven B to be preferred to Oven A? At what operating capacity (in pizzas per hour) would Oven B have to be used at to be more profitable per unit sold (ignoring fixed costs)? At the capacity calculated in question d, ho

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