Every night your truck makes one of two mistakes: a little food left over, or a customer sent away hungry. One of them costs pennies. The other costs dollars. This week you find out which is which.
Learning objectives. After this week you can (1) turn prep dollars into units you can serve; (2) compute the spoilage charge on what you did not sell; and (3) use expected value to compare prepping too much with prepping too little.
Remember this: leftovers cost pennies. Turned-away customers cost dollars.
1) Prep: dollars in, units out
Preppable units = Prep allocation ÷ Unit cost (round down)
Ingredient cost used = Units sold × Unit cost
Put $480 on burgers at $3.20 each and you can serve at most 480 ÷ 3.20 = 150 burgers, however long the line gets. Sell 120 of them and your sales used 120 × $3.20 = $384 of ingredients. Two things move the real figure: if your allocations add up to more than your ingredient budget, the sim scales them all down, and the Daily's food index multiplies what ingredients cost you (at 110%, $400 of ingredients costs $440).
Try it
You sold 296 burgers at an ingredient cost of $3.20 each.
Ingredient cost used = Units sold × Unit cost
Fill in the boxes.
2) The spoilage charge: 5% of what you didn't sell
Leftover = Prep bought − Ingredient cost used
Spoilage = 5% × Leftover
Prep $480, use $384, and $96 is left over. The charge is 0.05 × 96 = $4.80, not $96. Leftovers are not thrown away: the other 95% stays in your ingredient account for tomorrow.
Try it
You prepped 320 and sold 296, at $3.20 each.
Spoilage = (Prepped − Sold) × Unit cost × 5%
Fill in the boxes.
3) The two errors, priced
Lost contribution = Units short × Contribution margin per unit
A burger at $8.50 with a $3.20 unit cost has a $5.30 contribution margin. One leftover burger costs 5% × $3.20 = 16 cents. One turned-away burger customer costs $5.30, plus the fries and drink they would have bought, plus some goodwill: turning people away hurts your reputation and momentum. Thirty customers short is 30 × $5.30 = $159 gone.
4) Expected value: prep under uncertainty
Expected Value = Σ(outcome × probability)
Tomorrow could be slow (120 burgers) or good (160), each 50/50. Expected demand is 0.5 × 120 + 0.5 × 160 = 140. Now price two plans:
| Prep | If demand is 120 | If demand is 160 | Expected cost |
|---|---|---|---|
| 160 | 40 left: 40 × $3.20 × 5% = $6.40 | none | 0.5 × $6.40 = $3.20 |
| 120 | none | 40 short: 40 × $5.30 = $212 | 0.5 × $212 = $106 |
Same uncertainty, very different price tags. When one mistake is far cheaper than the other, the expected-value math leans toward making the cheap one.
Quick self-check
(a) You put $448 on burgers at $3.20. How many can you serve? (b) You sell 110. What is the spoilage charge? (c) Demand is 100 (20%), 140 (50%) or 180 (30%). What is expected demand? (Answers: 140; leftover 448 − 352 = $96, so $4.80; 20 + 70 + 54 = 144.)
Common mistakes
- Charging spoilage on all the prep. It is 5% of the leftover, not of everything you bought.
- Promising units before dividing. The sim takes dollars: divide by unit cost, round down.
- Counting only the burger. A turned-away customer takes their fries and drink with them.
This week in the arena
Open one Daily Report and find Prep bought, Ingredients your sales used, and Spoilage. Subtract to get your leftover and check the spoilage line against 5% of it (an event can push it higher). Then look in the Mechanics zone for a Stockout line. Which mistake did your truck make that day, and what did it cost you?