S7.

20:
Given information:
Selling Price: $14.
Oven Type A:
- Capacity: 20 pizzas an hour
- Fixed cost: $20,000
- Variable cost: $2.00
Oven Type B:
- Capacity: 40 pizzas an hour
- Fixed cost :$30,000
- Variable cost: $1.25
a. Oven Type A:
- The break-even point in dollars is
F 20,000
= =$
BEP $= V 2 23,3333.33
1−( ) 1−
P 14
- The break-even point in units is:
F 20,000
BEP X = = =1666.67 ≈ 1667 pizzas
P−V 14−2
Oven Type B:
- The break-even point in dollars is
F 3 0,000
= =$
BEP $= V 1.25 32,941,18
1−( ) 1−
P 14
- The break-even point in units is:
F 3 0,000
BEP X = = =2352.94 ≈ 2353 pizzas
P−V 14−1.25
For the question b,c,d. We will use crossover chart to answer these
question:
Let x: Crossover point between total cots of oven Type A line and total cost
of oven Type B line.
 The oven Type A yields a process that is most economical
up to V1
The total cost of oven Type A: 20000 +2x
 The total cost of oven Type B : 30000 + 1.25x
Therefore, we have:
20000 +2x = 30000+ 1.25x
 X=13,333.33
Figure: Crossover Chart.

From the diagram and Calculation,

b. If the owner expects to sell 9,000 pizza, The oven Type A should be
purchased. This is because at the point of 9000 pizzas, the total cost of
oven Type A line is below that of oven Type B. This means that oven Type A
will have lower total cost, which cause higher profit, compared to the oven
type B
c. Simmilarly, Because the total cost of oven Type A line is still below that of
oven Type B line at the point of 12000, The oven Type A should be
purchased.
d. At the point of 13,333.33, She can switch to buy oven Type B. This is
because from this point, the total cost of oven Type B is below that of oven
Type A line. This mean that Using oven Type B will yields a process that is
most economical.