Suppose a pizza parlor has the following production costs: $5.00 in labor per pizza, $3.00 in ingredients per pizza, $0.50 in electricity per pizza, $2 comma 500 in restaurant rent per month, and $450 in insurance per month. Assume the pizza parlor produces 6 comma 000 pizzas per month. What is the variable cost of production (per month) ?

Variable costs is $51,000

Explanation:

Variable costs as the name implies are costs that change based on changes in quantity or vary by a certain change in unit of measure.

For example a costs that changed by each unit of production, each unit of sale, as a percentage of another value like sales etc

variable costs per unit:

$5.00 in labor per pizza,

$3.00 in ingredients per pizza, $0.50 in electricity per pizza,

Total variable costs = $8.50 per unit.

Fixed costs:

$2,500 in restaurant rent per month,

$450 in insurance per month.

Total fixed costs = $2,950

the pizza parlor produces 6,000 pizzas per month.

Therefore variable costs = $8.50 x 6,000 units = $51,000