a Johnny sells pizzas The cost of ingredients to make a pizz

a. Johnny sells pizzas. The cost of ingredients to make a pizza is $2. Johnny pays his employees $40 per day. He also incurs a fixed cost of $120 per day. Calculate Johnny\'s total variable cost per day and average total cost per unit per day when he produces 100 pizzas using two workers? re wnuse sue Prs th pofit masimizing oupur leve ora mnoth the folncd curves? (k-1000) MC ATC 10 10k 12k MR

Solution

a. FC = $120 per day.

Number of workers = 2. Therefore the cost of workers (variable input) = $80

The ingredients are also variable costs because the number of pizza produced can be altered.  

Hence the variable cost = (2* 40) + (2*100) = $280 per day.

Now, TC = FC + VC = 280 + 120 = $ 400

ATC = TC /Q = 400 /100 = $4 per unit per day.

b. Price is determined at the quantity where MR =MC => Q = 10k units. Therefore P = $10.

TR = 10,000 * 10 = $100,000

TC = ATC * Q = 10,000 * 7 = $70,000

Profit = TR - TC = $30,000.

Please like my answer and give a thumbs up.