Question

Sammy's is the hot new lunch spot among the hipsters, who flock there at noon for...

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?

The answer is 5.56 slices. Could you show the work for solving this problem?

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

Let me know if you still ave doubt

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