Inspired by the Cory's cookie company video on TV, your friend Jill decided to explore starting a new cookie venture on the west coast. You, however, were lukewarm, and warned her of the challenges of building service businesses. To entice you to join, Jill proposed trying out the new venture for one weekend to see how things go - working 8 hour days this upcoming weekend to sell freshly baked cookies. Jill planned that you both work Saturday and Sunday without taking a break or taking any wages, and pilot with a small oven that can hold only one cookie tray at any given time. Suppose that the cookie baking sequence stays the same as we discussed in class (all information provided below- no need to refer back to the class notes)- the tasks and their durations are as follows: Mixing 6 minutes labor time for 1-3 dozens of the same type of cookies to mix the ingredients in a blender. Spooning 2 minutes of labor per dozen cookie to dish the blended ingredients into 1-dozen trays (unlimited trays are available) Baking 1 minute labor of oven loading time per 1-dozen tray, 8 minutes of labor-free oven baking time per dozen cookie, and 1 minute labor of oven unloading time per 1-dozen tray 5 minutes of labor-free time per dozen Cooling Packing 2 minutes labor per dozen Payment 1 minute labor per order Suppose that the material cost for each dozen of cookies is $3.00. Jill realizes she is in a very competitive industry, where the price is determined based on market conditions: she sets the price at $4 for a one dozen order, $7 for a two dozen order of the same type of cookies, and $10 for a three dozen order of the same type of cookies. Answer the following questions on the basis of the above information and the following information just for the weekend: 1. Jill decides to work on Mixing, Spooning and Baking (Oven) loading and unloading, and you agree to help her out this weekend by packing and collecting payment. (a) Consider a particular day when all orders are for one-dozen cookies. The new business is popular, and can sell all the cookies they make. Identify the bottleneck/limiting resource, and note down the maximum company capacity in dozens per hour in steady state (after the initial start-up effects vanish)? How much revenue/sales can they generate by selling only one-dozen cookies at $4 per dozen order during an 8-hour day? How many minutes of labor time is required of Jill and how many minutes of your labor time per one-dozen order? Ignore startup effects and consider steady-state. (10 points) (b) What are the unit economics of the proposed venture? If the venture requires an investment of $1,000 in equipment, how many one dozen cookie orders need to be sold to break even? How long (how many 8 hour days) will it take to break even? (5 points) (c) What do these calculations tell you about the pros and cons of unit economics as a metrics to assess new ventures? What would you tell Jill about the virtues of such a business? (5 points) (d) Suppose that instead of receiving orders for one-dozen cookies, all the orders you received were for two-dozen cookies of the same type. Also, suppose that the oven can hold one two-dozen cookie tray at a time. What would be the steady state system capacity (in dozens per hour)? How much extra revenue and profit can she generate by selling only two-dozen cookie orders at $7 per 2-dozen order? How many minutes of labor time is required of Jill and how many minutes of your labor time per 2-dozen order? Can the work be rebalanced to improve the scalability/capacity of this business? Ignore startup effects and consider steady-state (10 points) e. After the weekend experience, you conclude you have had enough of this venture, but Jill decides to work all by herself (toiling) during the next workweek. Jill plans to work eight hours every day without taking a break or paying herself any wages, and perform all the manual activities by herself but decides to take orders for only one-dozen cookies. What would be the steady state system capacity (in dozens per hour)? How much revenue can she generate by selling one-dozen cookie orders at $4 per dozen order? (10 points) (f) Wanting to generate more sales, Jill decides to speed up her process by buying a $500 industrial fan that will cut down cooling time by 2 minutes. How much extra money can she make with this investment per day if she only takes one-dozen cookie orders and can sell all she can make due to healthy demand? (5 points) (g) What 2-3 recommendations would you make to Jill about this business moving forward if she wants to make more money? (5 points)