Janelle heinke, the owner of ha'peppas! , is considering a new oven in which to bake the firm's signature dish, vegetarian pizza. oven type a can handle 22 pizzas an hour. the fixed costs associated with oven a are $ 25 comma 000 and the variable costs are $ 2.50 per pizza. oven b is larger and can handle 40 pizzas an hour. the fixed costs associated with oven b are $ 32 comma 500 and the variable costs are $ 1.50 per pizza. the pizzas sell for $ 12.00 each.

(a) what is the break-even point for each oven?
(b) if the owner expects to sell 9,000 pizzas, which oven should she purchase?

(A) Oven A 2,631.57 units

Oven B 3,095.24 units

(B) Oven A $60,500

Oven B $62,000

Explanation:

(a) The formula to compute the break even point is shown below:

= (Fixed expenses ) ÷ (Contribution margin per unit)

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit

So For Oven A, the break even point would be

= ($25,000) ÷ ($12 - $2.5)

= $25,000 ÷ $9.5

= 2,631.57 units

And For Oven B, the break even point would be

= ($32,500) ÷ ($12 - $1.5)

= $32,500 ÷ $10.5

= 3,095.24 units

(B) In this part, we have to compute the net income or net loss which is shown below:

We know that,

The net income would be = Contribution margin per unit × number of units - fixed cost

So For Oven A, the net income would be

= ($9.5 × 9,000 units) - $25,000

= $85,500 - $25,000

= $60,500

And For Oven B, the net income would be

= ($10.5 × 9,000 units) - $32,500

= $94,500 - $32,500

= $62,000

The oven B should be purchased as it have high net income than oven A

a. $48.75

is the answer to your question

answer the law of increasing costs;