What are all 4 of your levels of capacity utilization, assuming (1) downtime in the kitchen is approximately 10% of the required time of the kitchen i.c., if you remove 10% of the hours currently needed, you will be removing the time allotted for downtime)(2) demand is expected to remain steady for the foreseeable future; and (3) the current budgeted hours for kitchen use is the same as what is described above.
Recall, the commercial kitchen space you rent has a minimum rental requirement of 40 hours per week. Your team noticed the actual use of the kitchen is roughly 2530 hours of prep work for the taco truck each week, leaving 10 - 15 hogrs of unused time. To fill the unused time, your team began producing and selling fresh, jarred salsa. Current salsa sales are steady at roughly 60 jars per week that sell at a price of $10 per jar, currently. This salsa demand is satisfied using only 12 hours of dedicated kitchen time per week, as some of the time for making all products can be used simultaneously. As your team has started producing tortillas for the single upscale grocery location, you now need to determine if your current arrangement with the commercial kitchen space provides enough capacity to handle all of your product lines (regular taco truck business, salsa, and tortillas). The tortilla product line requires approximately 100 hours of labor per week, but is divided between 5 employees who all work at the same time to produce the tortillas. This means there is a need for 20 hours of dedicated kitchen time per week, plus an additional 5 hours for set up and clean up. Currently, you rent the space at the minimum rate of 40 hours per week for a fixed fee of $5,000. Additional hours can be added at a rate of $100 per hour (a 10% surcharge is added to this rate if the hours are ad-hoc rather than contracted). The kitchen allows for you to rent for a maximum of 160 hours per week ( 24 hours per day x 7 days per week; less 8 hours per week for a deep clean of the kitchen required and covered by the landlord). Besides purchasing additional hours for the same kitchen space, another kitchen space can be rented simultaneously with the rental contract starting at $5,000 for the minimum of 40 hours per week. The landlord offers customers renting a second space a discount of 10% off the minimum rental amount for the second space only. Despite being able to use the kitchen space for 160 hours a week, your team has determined that you can only work in the kitchen from 6AM6PM each day due to employees being needed to run the taco truck. This limits your use of the kitchen to a maximum of 12 hours per day. Using all of this information your team has gathered, you now need to make some decisions concerning your kitchen rental. REQUIRED: You will compose an email to your advisory board detailing your decisions pertaining to the commercial kitchen rental. You need to make sure to include the following: 1. What are all 4 of your levels of capacity utilization, assuming (1) downtime in the kitchen is approximately 10% of the required time of the kitchen (i.e., if you remove 10% of the hours currently needed, you will be removing the time allotted for downtime); (2) demand is expected to remain steady for the foreseeable future; and (3) the current budgeted hours for kitchen use is the same as what is described above. 2. Do you currently have enough kitchen space rented to satisfy your practical capacity? Explain. 3. What would your team like to do? Support your answers
