Mar 12, 2023 . 10:52am
General

# How to calculate the cost per item

Let’s consider our example of a chef working on the cooking step. Check the example model. The background information:

To cook, we need both a chef and stoves. Let’s assume we have only one chef and two stoves, each with four burners. These parameters determine how many items a chef can cook within one run. The step properties determine the run duration, and for the sake of simplicity, let’s assume that it takes one day to complete cooking.

To cook, we need both a chef and stoves. Let’s assume we have only one chef and two stoves, each with four burners. These parameters determine how many items a chef can cook within one run. The step properties determine the run duration, and for the sake of simplicity, let’s assume that it takes one day to complete cooking.

So let’s explore how much our dish costs under different parameters.

When we run a simulation with an order intake of one per hour and observe the results. By the fifth day, we will have received only five orders, resulting in a process throughput of one order per day and a dish cost of \$960. Since our step has a throughput of one item a day, all resources allocated are required to produce that one item; therefore, all costs associated with these resources are the cost of one item production. In our situation, to prepare one meal, we need a chef, which costs \$800 (\$100*8) for eight hours, and one stove, which costs \$160 (\$20*8) for eight hours, in total \$960 If we increase the number of incoming orders per day to 5 and increase the capacity of our chief to 5, then we will see the cost per item dramatically reduced to 200. Since it takes (\$100 * 8 )/5 + (\$20 * 8)/ 4 = \$200   