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Assume that Kristens most important customer has just submitted an order for one dozen cookies, and that she wants to give the highest priority to this order. How long will it take to fill this order?

The time required to fill the rush order is: Processs Throughput Time =26 minutes

Assuming that Kristens Cookie Company is open for four hours each night, how many orders can be filled each night?

Which activity is the processs bottleneck? Load and bake The processs bottleneck is 10 minutes So accordingly 6 order can be completed in hour and 24 in 4 hours.

How much of your own and your room mate valuable time will it take to fill each order?

From the Slide 2 Kristen roommate is working for 2 process To put cookies in the oven and set the thermostat and timer which takes 1 minute. Packing the cookies in the box takes 2 minutes per dozen and accepting payment takes 1 minute. Time taken by own for mix & spoon is 8 minutes . So together total time is 12 minutes out of total throughput time is 26 minutes.
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Assume that Kristen pays herself and her roommate \$12 per hour. If Kristen and her roommate are not paid for idle time, what is the minimum amount Kristen should charge for one dozen cookies? If Kristen and her roommate are paid regardless of whether they are busy or idle, what is the minimum amount Kristen should charge for one dozen cookies? From the previous slide, recall that, in each 10minute cycle, Kristen and her roommate work a total of Kristens and the roommates wage is From the case, the materials cost per dozen is \$0.60 for ingredients and \$0.10 for the box, for a total of

## \$12/hr or \$0.20 /min

Nightly capacity is

8 + 4 =12 minutes
LABOR IS A VARIABLE COST (not paid when idle)
MATERIALS LABOR (\$0.20/min)(12 min) =

24 dozen

\$0.70

## LABOR IS A FIXED COST (paid when idle)

MATERIALS LABOR [(\$12/hr)(4 hrs)(2 persons)]/(24 dozen) = \$0.70 \$4.00

\$0.70 \$2.40

TOTAL

\$3.10

TOTAL

\$4.70
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Should you give any discount for people who ordered 2 or more dozen cookies ? If so how much ? Will it take any longer to fill a 2 dozen cookie order then 1 dozen cookie order ? Assuming that Kristen pays himself and his roommate Rs. 120 per hour i.e. Rs. 2 per minute If they started working on 2 dozen orders simulatneuously, they are completing the process in 36 minutes. If they work on 2 dozen orders one after other, it takes 26 min * 2 = 52 minutes So total time saved = 52 min 36 min =16 min Now raw material and package cost it fixed irrespective of order. The total cost incurred would be 70 + (26*4)=174(for 1 dozen).So for 2 dozen it will be 348.If they produce 2 dozens simultaneously we have 140 +(36 * 4)= 284,so we save Rs.64. So we can pass the saving of 25% that is 16 Rs to the customer who gives 2 dozen orders. So it will cost the customer 348-16=332 Rs (5% discount) In a similar manner we can give discounts to customers who order 2 or more dozens simultaneously.

How many food processors and baking trays will you need ? We will need 1 processor,2 baking trays and 1 oven. This will lead to maximum utilization of the available resources(as we are starting 2 process within 26 minutes of throughput time, we need one more tray to minimize the time)

How many food processors and baking trays will Kristen need?

Are there any changes you can make in your production plan that will allow to make better cookies or more cookies in less time or at lower cost? What is the effect of adding another oven ? How much would you be willing to pay to rent an additional oven? Is there any bottleneck operation in your production process that you can expand cheaply? 10

If we are adding another oven our throughput time will be reduced to 21 minutes. Now bottleneck for the process will be Mix & Spoon and time it will take is 8 minutes. Output will be now 7.5 dozens per hour. Now output per night ( 4 Hour shift) is increased from 6 to 7.5 dozens so overall in one night we can have additional o/p of 6 dozens. Therefore, the value of the 2-nd oven equals (6 dozens)[(Selling Price per Dozen)-(Variable Cost per Dozen)] Variable cost per dozen is Rs.70 ( i.e. Rs 60 per dozen for ingredients and Rs. 10 per box & per dozen). So renting of second oven depends upon the rent and selling price of cookies. From the above formula we can calculate whether we are making profit or not ? So accordingly he 11

Process is continues operation i.e. is operates at a steady state with no start up and shut down issues An adequate capital equipment and availability of resource is available i.e. one food processor, cookie trays and spoon and oven which can hold one tray at a time Landlord pays for the electricity and variable cost involved are cost of ingredients which is Rs.60 per dozen, cost of box Rs.10 per box and each box can hold up to 12 cookies ( 1Dozen). There are no variations and statistical fluctuation so that time estimates are fixed and constant. 12

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