The local convenience store makes personal pan pizzas. Currently, their process makes complete pizzas, fully cooked, for the customer. This process has a fixed cost of $20,000, and a variable cost of $1.75 per pizza. The owner is considering a different process that can make pizzas in two ways: completely cooked (as before), or partially cooked and then flash frozen, for the customer to finish at home. This alternate process has a fixed cost of $24,000, but a lower variable cost (because much less energy is used in baking) of $1.25 per pizza. a. What is the crossover point between the existing process and the proposed process?b. If the owner expects to sell 9,000 pizzas, should he get the new oven?

Instructions are below.

Explanation:

Giving the following information:

Process A:

Fixed cost= $20,000

Unitary variable cost= $1.75

Process B:

Fixed cost= $24,000

Unitary variable cost= $1.25

A) First, we need to structure the total costs formula:

Process A= 20,000 + 1.75x

Process B= 24,000 + 1.25x

x= number of units

Now, we will equal them to determine the crossover point:

20,000 + 1.75x = 24,000 + 1.25x

0.5x= 4,000

units= 8,000

B) units= 9,000

Process A= 20,000 + 1.75*9,000= $35,750

Process B= 24,000 + 1.25*9,000= $35,250

The company should acquire a new process.

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