You and your roommate are preparing to start a company producing cookies in your oncampus apartment. By starting up this business, you want to provide fresh cookies to starving fellow students late at night. However, you still have to figure out some aspects of the business model such as the price to charge, whether you will be able to make profit and how many orders you can accept.
The business concept You have an extraordinary idea: to bake fresh cookies on delivery, using a customer chosen combination of ingredients. The cookies can be picked up at your apartment within one hour.
Several factors will enable you to be different from your competitors such as store-bought cookies. First, the cookies will be fresh since they will only be produced after the order is received. Therefore, the buyer will be getting cookies that are literally hot out of the oven. Second, you will have a variety of ingredients available to add to the basic dough, including chocolate chips, M&M’s, chopped Heath bars, coconut, walnuts, and raisins. Buyers will telephone in their orders and specify which of these ingredients they want in their cookies. Consequently, you will have the freshest, most exotic cookies anywhere, available to your fellow students next to campus.
The production process Baking cookies is simple: mix all the ingredients in a food processor, spoon out the cookie dough onto a tray, put the cookies into the oven, bake the cookies, take the tray of cookies out of the oven, let the cookies cool and finally, take them of the tray and pack them in a box. You and your roommate already own all the necessary capital equipment: a food processor, cookie trays and spoons. Your apartment is equipped with a small oven that is able to hold one tray at a time. Your landlord pays your electricity. As such, the variable costs are merely the cost of the ingredients (estimated to be 1 Euro/dozen), the cost of the box in which the...