Sammy's is the hot new lunch spot among the hipsters, who flock there at noon for their artisanal peanut butter and jelly sandwiches, which sell for $12.95. The sandwiches are made from two slices of their own artisanal bread, which they bake continuously throughout the day at a rate of seven loaves an hour (each loaf contains twenty slices). The actual cost of a loaf of bread is $1 and the cost to hold a loaf is 80%, since freshness is important in baking as well as to hipsters. The cost to run a new batch of a dough is $3 per loaf. Sammy's sells their sandwiches at a rate of fifty per hour.

What is the optimal batch size to produce?

Question

Business

Eloise

19 February, 23:04

Sammy's is the hot new lunch spot among the hipsters, who flock there at noon for their artisanal peanut butter and jelly sandwiches, which sell for $12.95. The sandwiches are made from two slices of their own artisanal bread, which they bake continuously throughout the day at a rate of seven loaves an hour (each loaf contains twenty slices). The actual cost of a loaf of bread is $1 and the cost to hold a loaf is 80%, since freshness is important in baking as well as to hipsters. The cost to run a new batch of a dough is $3 per loaf. Sammy's sells their sandwiches at a rate of fifty per hour.

What is the optimal batch size to produce?

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Answers (1)

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Ahmed Kim · Answer 1

Optimal batch size to produce = 5.56 slices

Explanation:

Selling rate of sandwich = 50 / hour

No of slices used per hour = 50 * 2 = 100 (each sandwich use 2 slices)

No of loafs which gets baked in an hour = 7

No of sandwich slices which get produuced in an hour = 7*20 = 140

No of sandwich which can be produce = 10/2 = 70

So every hour no of slices to be hold = 40

No fo loaf to be hold = 40/20 = 2

Cost of holding = 0.8 * 1 = 0.8

Cost of running a new batch = $3*2 = $6

Selling each sandwich = $12.95

Saving = $12.95 - $6 = $6.95

Optimal batch size = saving * (Holding cost) = 6.95 * 0.8 = 5.56 slices