Determine a production schedule that will optimize our profit in our current operations?

Determine how long it would take to recover the costs of purchasing a new oven given our existing demand?

PCL is famous for its rye bread. Both our rye bread and white bun recipes use specialized bases, to which flour, yeast, and water are added

Baking process

It takes approximately 15 minutes to make a batch of rye bread (40 loaves), and 30 minutes to make a batch of white buns (45 dozen).

The baking time for a batch of rye bread is 40 minutes, and for a batch of white buns it's 15 minutes. Our oven can hold three batches of rye bread or one batch of white buns at a time. As required under health and safety legislation, the oven only operates 16 hours per day, 365 days a year. Right now, we seem to be operating our oven at full capacity and we are still having trouble keeping up with demand

Batch components and yield

Rye bread White buns

Variable cost per batch $33.41 $38.75

Selling price $3.29 per loaf $3.09 per dozen

Demand

Daily demand for our products is currently 2,400 loaves of rye bread and 900 dozen white buns. Given the growing demand for our products, some of our customers are being shorted on their orders. Some of these customers have voiced their concerns about the impact this is having on their businesses and have threatened to take their business to a competitor if we cannot service them effectively.

Oven

A new oven has been priced out at $300,000 and will have capacity identical to that of the existing oven. The model we are considering has recently been in the news as a number of parts have been recalled. Replacement parts for this model of oven are not available locally, but the supplier assures us the issue resulting in the recall has been addressed.