I went to Jimmy Johns sandwich shop for lunch, and saw 11 people working there. It would be reasonable if there were customers, but I was the only one there. I bet they have to pay 9 dollars per person, so $9 x 11ppl = 99 dollars per hour for just Direct Labor. How many sandwiches do you have to sell to even pay for direct labor? They charge $5.25 a sandwich, which would mean they have to sell 19 sandwiches a hour or one per 3 minutes. Even if they break even with Direct Labor costs, they still have Direct Material, Overhead and Fixed/Administrative Costs to deal with.

 I don’t know how much Direct Material they need to buy to make the sandwiches; I would assume 20% of the price, so 1.05 lost per sandwich. For Overhead costs they have the sandwich dressing, wrappers, bags and napkins, all of which aren’t much individually, but when combined can cost a fortune. Direct Labor, Direct Material, and Overhead constitutes the product cost; the $5.25 per sandwich is set because management tried their best include all those costs in the product. But with the massive surplus of…