You are interested in opening a new bakery in town. You are considering locations, and combinations of inputs to determine whether you should open, if you would be successful, and where you should open if you go forward with the bakery. You have secured the opportunity of a $200,000 business loan and plan to invest $25,000 of your own money if you are to move forward with opening the bakery. You plan to be open 6 days per week. Business Loan repayment: $7,555/month for 3 years if you use all $200,000, if you use less than $200,000, the monthly payment is ((amount borrowed*0.12*3) + amount borrowed) / 36. Legal Fees: $200/month Insurance: $500/month Accounting Fees: $300/month Bakery ovens, one time cost: $10,000 (can produce 200 units/day) Mixers, one time cost: $2,000 (can produce 60 units of dough, twice per day) Shelving, one time cost: $300 (can hold 50 units) Refrigerator, one time cost: $2,000 Storage, one time cost: $1,500 Construction cost, one time cost: $30,000 Incorporation fees, one time cost: $1000 Employee: $400/week (employee 1 can make up to 50 units per day, employee 2 can make up to 100 units, employee 3 can make up to 70 units, each subsequent employee can make 10 units less than the previous employee) Raw Materials: $1.50/unit

Location 1: $1,700/month Room for: 1 oven, five shelves, one refrigerator, one storage, one mixer, and five employees. Demand: 50 units at $8, 100 units at $7, 150 units at $6, 200 units at $5, 250 units at $4, 300 units at $3, 350 units at $2, 400 units at $1

Location 2: $2,400/month Room for: 2 ovens, six shelves, one refrigerator, one storage, two mixers, and six employees. Demand: 75 units at $8, 150 units at $7, 225 units at $6, 300 units at $5, 375 units at $4, 450 units at $3, 525 units at $2, 600 units at $1

Location 3: $1,200/month Room for: 1 oven, two shelves, one refrigerator, one storage, one mixer, and three employees. Demand: 100 units at $8, 200 units at $6, 300 units at $4, 400 units at $2

Location 4: $3,000/month Room for: 2 ovens, 7 shelves, one storage, one refrigerator, three mixers, seven employees. Demand: 150 units at $9, 300 units at $7.50, 450 units at $6, 600 units at $4.50, 750 units at $3, 900 units at $1.50

6. Calculate the profits in each profit-maximizing scenario for each location. (compare P to ATC)

7. If you are losing money in all scenarios, apply the shut-down rule by comparing P and AVC.