Suppose a pizza parlor has the following production costs: $4.004.00 in labor per pizza, $2.002.00 in ingredients per pizza, $0.600.60 in electricity per pizza, $2 comma 5002,500 in restaurant rent per month, and $400400 in insurance per month. Assume the pizza parlor produces 5 comma 0005,000 pizzas per month. What is the variable cost of production (per month)

Answer: If the pizza parlor produces 5000 pizzas a month its total variable costs per month will be

5000 * (4.004 + 2.002+0.60060)

33,033 will be the total variable costs.

Variable cost for production of 5000 Pizzas in the month is $33,000

Explanation:

The variable elements of the production costs are those that shift or change per quantity of item produced.

Some won't change, they are described as fixed e. g. Rent and Insurance from our present question

Variable Cost of production for the month

Labour - $4 x 5000 Pizzas = $20,000

Ingredients - $2 x 5000 Pizzas = $10,000

Electricity - 0.6 x 5000 Pizzas = $3,000

Total Variable Costs = $33,000