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Not understanding premise in Table 5

Hi,

this question is related to productivity and data in Table 5. - Pulled Pork Burgers.

So we have a data on number of PPB in a day (30), number of dedicated hours for those burgers (4) and employee cost (25e/h). Meaning that an employee works 4hrs (100euros) for 30 burgers. So we assumed that the only thing that employee does in those 4 hours is cooking burgers - he produces 7.5 burgers in an hour.

In the next question we concule that by selling 9 burgers/hour we will manage to break even. But if we sell 9 burgers, will our employee be able to produce that number in an hour? My opinion is that if they can produce at 9 b/h then we shouldn't have assumed in question before that they produce 7.5 burgers in an hour - they should be able to produce at speed of 9 b/h and allocate the rest of the time for making other food?

In other words, if we sell 36 burgers and keep the same cooking speed, our profits should be R =180 (36*5) minus C= 72 (2*36) + 120(36/7.5 * 25 - number of hours needed to cook 36 burgers * price per hour) which is 180-192 = -12

So my opinion is that in this case we assumed that the productivity of the emps increased or that the time for PPB is not isolated well enough as a factor. I would love to hear opinions, please help me understand the correct logic if this is incorrect.

Thanks

Hi,

this question is related to productivity and data in Table 5. - Pulled Pork Burgers.

So we have a data on number of PPB in a day (30), number of dedicated hours for those burgers (4) and employee cost (25e/h). Meaning that an employee works 4hrs (100euros) for 30 burgers. So we assumed that the only thing that employee does in those 4 hours is cooking burgers - he produces 7.5 burgers in an hour.

In the next question we concule that by selling 9 burgers/hour we will manage to break even. But if we sell 9 burgers, will our employee be able to produce that number in an hour? My opinion is that if they can produce at 9 b/h then we shouldn't have assumed in question before that they produce 7.5 burgers in an hour - they should be able to produce at speed of 9 b/h and allocate the rest of the time for making other food?

In other words, if we sell 36 burgers and keep the same cooking speed, our profits should be R =180 (36*5) minus C= 72 (2*36) + 120(36/7.5 * 25 - number of hours needed to cook 36 burgers * price per hour) which is 180-192 = -12

So my opinion is that in this case we assumed that the productivity of the emps increased or that the time for PPB is not isolated well enough as a factor. I would love to hear opinions, please help me understand the correct logic if this is incorrect.

Thanks

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Hi,

Your reasoning is completely right, without changing the cooking speed the business is not profitable. If you read carefully that part, the author says:

Assuming that the employee cannot work faster, this loss will get bigger the more our sales grow.

And then he suggests a potential solution that is

Barb could find an employee that works faster

But how much faster? To answer this question he calculates that an employer should be able to produce 9 burgers/h in order to become profitable.

Is it more clear now?
Feel free to contact me if you want to discuss more about it.

Luca

Hi,

Your reasoning is completely right, without changing the cooking speed the business is not profitable. If you read carefully that part, the author says:

Assuming that the employee cannot work faster, this loss will get bigger the more our sales grow.

And then he suggests a potential solution that is

Barb could find an employee that works faster

But how much faster? To answer this question he calculates that an employer should be able to produce 9 burgers/h in order to become profitable.

Is it more clear now?
Feel free to contact me if you want to discuss more about it.

Luca