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The owner of a pizza place is considering a new oven in which to bake the pizzas. Oven type A can handle 25 pizzas per hour. The fixed costs associated with oven A are $10,000 and the variable costs are $2.00 per pizza. Oven B is larger and can handle 40 pizzas per hour. The fixed costs associated with oven B are $30,000 and the variable costs are $1.50 per pizza. The pizzas sell for $14.00 each.
a) What is the breakeven point for each oven?
b) If the owner expects to sell 20,000 pizzas, which oven should she purchase?
c) If the owner expects to sell 6,000 pizzas, which oven should she purchase?
d) At what volume should Janelle switch ovens?
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