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

By decreasing the pizza price from $5.50 to $5.00 and doubling the sales volume from 5,000 to 10,000 pizzas, the shop's monthly profit is projected to increase by $22,500.

Step-by-step explanation:

To assess the impact of changing the pizza selling price on profits, we first compute the current monthly profit. Given that 5,000 pizzas are sold at $5.50 each, the total revenue is 5,000 times $5.50, yielding a revenue of $27,500. From this, we subtract the total costs of $8,000 to find the current monthly profit, which is $27,500 - $8,000 = $19,500.

For the proposed price change, where the price per pizza drops to $5.00 and the projected sales volume increases to 10,000 pizzas, the revenue would be 10,000 times $5.00, equating to $50,000. Subtracting the same total costs of $8,000, the new monthly profit would be $50,000 - $8,000 = $42,000.

Comparing the current and projected profits, the increase in profit would be $42,000 (new profit) - $19,500 (current profit) = $22,500. Therefore, reducing the selling price to $5.00 per pizza is projected to increase the pizza shop's monthly profit by $22,500.

Answer 2

Instructions are listed below

Step-by-step 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