Production Processes at Kristen's Cookie Company

Kristen’s Cookie Company

Missing Charts

We have studied Kristen’s Cookie Company’s planned production process, and have drawn a number of conclusions based on our analysis. The understanding of our analysis will be facilitated by the following flow chart, which shows each step along the production process. The coloration denotes work performed by each member of the two-person workforce, and capacity and timing are specified below for each step:

From the above chart, we see that when the process is continuing at maximum efficiency, filling one order of a dozen cookies will take 26 minutes.

The oven will be a source of bottlenecking since its portion of the process lasts ten minutes while the preceding and ensuing steps require a total of eight minutes each. Below is a Gantt chart which clarifies this bottlenecking phenomenon. For simplicity, we have combined the removing and cooling step with the packaging step:

If we choose to consider the pure capacity of this production process (neglecting startup and finishing time), we see that, once the production is underway, each batch will add another ten minutes to production time. However, we see that from the moment the first batch goes into the oven (eight minutes after beginning operations), if we use the oven at maximum capacity without pause, and allow for the eight minutes required for cooling, packaging, and completing the transaction after taking the last batch out, we can produce x dozen cookies in y minutes where y=8+10(x)+8 . If we assume that operations run for four hours every evening, then we see that we can produce 22 dozen cookies every night, and that four minutes will remain without productivity. Realistically, at least four minutes will be needed...

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...ply. Each night, an additional two boxes of cookies could be baked, implying an additional 2×$5.35 in revenue, for an additional cost of 2×$.70. The resulting nightly additional profit would then be $9.30. A monthly rental should therefore not exceed 30×$9.30=$297, and the difference between the additional profit and the rental would contribute to the total profit of the operation.

The assumption that we have made about fixed and variable costs is key to the price setting process. To demonstrate this fact, suppose that we had overestimated our variable costs to be $1.00 per dozen. This would lead us to seek the maximum of the new equation P=(p-1)(60-6p), which would in turn lead us to the erroneous conclusion that the price should be set at $5.50 per dozen. Similarly, the underestimation of variable costs at $.40 would have led us to set a price of $5.20.