I was wondering if I could get some help to determine a production schedule that optimizes this company's profit in its current operations as well as how long it would take to recover the costs of purchasing an additional oven given the existing demand. Lastly, if you could help me understand the financial implications of the Winnipeg Arena deal, as it has stated it will require a significant investment in some specialized equipment.

I'm mainly looking for the quantitative help if possible.

Knead Bread Ltd. (KBL) is located in Winnipeg and produces specialty breads and buns. It is equally owned by brothers, Lawrence and David Sears, and a third shareholder, Amy Young.

Lawrence:KBL has been struggling to maintain profitability. Here is some information related to our two products (Appendix I). We seem to be operating at full capacity these days, so we want to determine a production schedule that will optimize our profit in our current operations. As well, we would like to know how long it would take to recover the costs of purchasing an additional oven given our existing demand.

David:In addition, we have recently been asked to supply buns to the Winnipeg Arena for the upcoming hockey season and ongoing events for the next five years (Appendix II). I would like to know the financial implications of this deal, as it will require a significant investment in some specialized equipment. As well, can you outline the qualitative factors that we should consider regarding this potential contract?

Amy:I have been involved with KBL for over 20 years and would now like to reduce my involvement in the business. I want to retain 10% ownership of the company for sentimental reasons and retain the prospect of receiving future dividends. Here is some information about my finances (Appendix III). I would appreciate your advice on whether or not I can afford to retire now, as well as any suggestions you may have for me if my financial resources are not sufficient at this point. I am skeptical about government programs and want to ensure I can retire based on my funds alone.

Lawrence: David and I want to keep KBL in our family, so we will buy any shares Amy is willing to sell. For now, don't worry about the actual sale or any tax consequences ? just focus on Amy's request.

The owners of KBL depart, and Gary asks you to prepare the requested information, including any relevant qualitative considerations.

Appendix I

Bread and bun product lines

KBL 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

The baking time for a batch of rye bread (120 loaves) is 40 minutes, and for a batch of white buns (45 dozen) it's 15 minutes. Our oven can hold one batch 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.