You and your roommate are preparing to launch Kristens cookies company in your on-campus apartment. The company will provide fresh cookies to students late at night. You need to evaluate the design for the companys production process and make key policy decisions, including what prices to charge, what equipment to order and how many orders to accept, and to determine whether the business can be profitable.

Business Concept:

Your idea is to bake fresh cookies using any combination of ingredients that the buyer wants. The cookies will be ready for pickup at your apartment within an hour.

Factors that set you apart from store-bought cookies are: 1) Your cookies are completely fresh. You will not bake any cookies before receiving the order (buyer will receive fresh and hot cookies)

2) You will have a variety of ingredients to add to the basic dough such as chocolate chips, M&Ms, chopped Heath bars, coconut, walnuts, and rasins. Buyers will order their customized cookies via Instagram.

The Production Process

You place all the ingredients in a mixing bowl and mix them; spoon the cookie dough onto a tray; put the cookies into the oven, bake them, take the tray of cookies out of the oven, let the cookies cool, take the cookies off the tray and carefully pack them in a box.

You and your roommate own all the necessary capital equipment. A high-capacity professional electric mixer, cookie trays and spoons. Your apartment has an oven that holds one tray at a time. Your landlord pays for all the electricity. Therefore, the variable costs are merely the cost of ingredients ($1.5/dozen), the cost of the box in which the cookies are packed (0.15 per box, each box holds a dozen cookies), and your time (what value do you place on your time?).

Production Process Details

First step is to take an order via social media which will be extremely fast that tells customers when their orders are ready for pickup. Since this step does not take much time, it will be ignored in further analysis.

The first physical production step is to wash out the electric mixers bowl and beaters from the previous batch, add the ingredients to the bowl, and turn on the mixer to mix the ingredients. The mixer can hold and mix ingredients for up to three dozen cookies. You then spoon the cookies, one dozen at a time, onto a cookie tray. These activities take 5 minutes for the washing and mixing steps, regardless of how many cookies are being made in the batch. That is, to mix enough dough and ingredients for three dozen cookies takes the same 5 minutes as for one dozen cookies. However, spooning the cookies onto the tray takes 1 minutes per tray.

The next step, performed by your roommate, is to put the cookies in the oven and set the thermostat and timer, which in total takes about 1 minute. The cookies bake for the next 8 minutes. So total baking time is 9 minutes, during the first minute of which your roommate is busy setting the oven. Because the oven only holds one tray, a second dozen takes additional 8 minutes to bake.

Your roommate also performs the last step by removing the cookies from the oven and putting them aside to cool for 4 minutes, then packing them in a box and accepting payment. Removing the cookies from the oven takes negligible amount of time. It takes 2 minutes to pack each dozen and about 1 minute to accept payment.

Questions to Answer Before you Launch the Business

You need to set prices and formulate rules for accepting orders. You need a plan so that you can do calculation on how much time you have to devote to this business each night and how much money you can make. Answer the following questions:

1. How much of your own and your roommates time will it take to fill each order?
2. Because your baking trays can hold exactly one dozen cookies, you will produce and sell cookies by dozen. Should you give any discount for people who order two dozen cookies, three dozen cookies, or more?If so, how much? How long it take to fill two dozen cookies?
3. How many electric mixers and baking trays you need?
4. Any changes you can make to make better cookies or more cookies in less time and lower costs? Is there any bottle neck operation that you can expand cheaply? What is the impact of adding another oven? How much would you be willing to pay for additional oven?