Chipotle is currently testing Chippy, a robot that makes tortilla chips. Chippy makes the chips less than perfect so that they appear to be made by a human. Customers are used to finding a chip with a little more salt or a little extra lime, so Chippy is making those subtle variations in the chips.

Chipotle’s test kitchen in Irvine, California, is currently testing Chippy. Chipotle plans to test Chippy in a restaurant in California later this year. Depending on the results of testing, Chipotle may roll out Chippy across the U.S.

See Chippy in Action

Because the costs and other details associated with a Chippy robot are not available, let’s make some assumptions. Let’s say that a Chippy robot costs $15,000 and is expected to last five years. The sales tax on the purchase is $600. The transportation cost to get a Chippy robot from the factory to Chipotle is $500. Installation costs per robot are estimated to be $700. Assume that annual maintenance on one Chippy robot is $1,200 per year.

1. What are your thoughts about Chippy - good idea or bad idea?
2. Why would Chipotle want to make this investment?
3. What is the total cost of a Chippy robot that will be capitalized and recorded as a plant asset?
4. When will the cost of Chippy be expensed?
5. How should the annual maintenance costs of a Chippy robot be treated? What about the cost of the ingredients of the tortilla chips?
6. How will Chipotle recognize the costs of Chippy, its tortilla-chip-making robot?

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