Question

Suppose a pizza parlor has the following production​ costs: ​$5.00 in labor per​ pizza, ​$3.00 in ingredients per​ pizza, ​$0.50 in electricity per​ pizza, ​$2 comma 500 in restaurant rent per​ month, and ​$450 in insurance per month.Assume the pizza parlor produces 6 comma 000 pizzas per month.What is the variable cost of production​ (per month)?

Answer 1

Variable costs is $51,000

Step-by-step explanation:

Variable costs as the name implies are costs that change based on changes in quantity or vary by a certain change in unit of measure.

For example a costs that changed by each unit of production, each unit of sale, as a percentage of another value like sales etc

​variable costs per unit:

$5.00 in labor per​ pizza,

$3.00 in ingredients per​ pizza, ​$0.50 in electricity per​ pizza, ​

Total variable costs = $8.50 per unit.

Fixed costs:

$2,500 in restaurant rent per​ month,

​$450 in insurance per month.

Total fixed costs = $2,950

the pizza parlor produces 6,000 pizzas per month.

Therefore variable costs = $8.50 x 6,000 units = $51,000