Buy or bake the cookies Economics simplified
n To estimate the value of the product manufactured many parts of economics must be considered. n n n n land building cost equipment cost construction cost materials cost labor cost energy cost taxes, interest and depreciation
n For our simple case the minimum information required is n n n material cost energy cost labor cost
Material costs Material Cost/unit n Flour $ 1. 79/5 lbs bag n Bicarbonate of soda $ 0. 49/16 oz box n Salt $ 0. 49/1 lb 10 oz box n Margarine $ 0. 99/1 lb tub n Sugar $ 1. 99/5 lbs bag n Brown sugar $ 0. 79/1 lb box n Vanilla extract $ 1. 79/1 fl oz bottle n Eggs $ 1, 19/dozen (medium) n Chocolate chips $ 2. 59/11. 5 oz bag n Ground walnuts $ 2. 99/9 oz bag
Energy and labor costs n n Although baking cookies is a labor of love, we must assign a value to it. In this case we will use the minimum wage of $7. 25/h. For energy cost we use the average residential electricity rate in NJ of $0. 12/k. Wh
Cost estimate (materials) Material Amount used Flour Cost/batch 532. 3 g $ 0. 42 Bicarbonate of soda 4. 9 g $ 0. 01 Salt 4. 9 g $ 0. 01 236 g $ 0. 51 Sugar 177. 5 g $ 0. 16 Brown sugar 177. 5 g $ 0. 31 Vanilla extract 4. 9 cm 3 $ 0. 30 Margarine Eggs 2 each $ 0. 20 Chocolate chips 473. 2 g $ 3. 75 Ground walnuts 236. 0 g $ 2. 76 Total material cost $8. 42/batch
Cost estimate (energy) n The cookies are baked in a 2500 W home electric oven for ~30 minutes. Energy cost = 2. 5 k. W x 0. 5 h x $0. 12/k. Wh = $0. 15/batch of cookies
Cost estimate (labor) Task Time used Chargeable time Preparation Baking 0. 50 h Total 1. 00 h % work/time 100 50 0. 50 h 0. 25 h 0. 75 h Labor cost = $7. 25/h x 0. 75 h = $5. 44/ batch of cookies
Cost estimate (total) n Total cost/ batch of cookies = $ 13. 86 There are 20 cookies/batch Cost of one of our delicious cookies is ~ $ 0. 69
Commercial product price n For 1 pound of similar size and quality cookies (14 -15 pieces) from several local bakeries the price ranged between $14. 00 and $15. 00. The cost of a commercial cookie is ~$ 0. 95
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