Buy or bake the cookies Economics simplified

To estimate the value of the product manufactured many parts of economics must be considered. land and building cost equipment cost construction cost materials cost labor cost energy cost taxes, interest and depreciation

For our simple case the minimum information required is material cost energy cost labor cost

Material costs Material Cost/unit Flour $ 1.79/5 lbs bag Bicarbonate of soda $ 0.49/16 oz box Salt $ 0.49/1 lb 10 oz box Margarine $ 0.99/1 lb tub Sugar $ 1.99/5 lbs bag Brown sugar $ 0.79/1 lb box Vanilla extract $ 1.79/1 fl oz bottle Eggs $ 1,19/dozen (medium) Chocolate chips $ 2.59/11.5 oz bag Ground walnuts $ 2.99/9 oz bag

Energy and labor costs 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/kWh

Cost estimate (materials) Material Amount used Cost/batch Flour 532.3 g $ 0.42 Bicarbonate of soda 4.9 g $ 0.01 Salt 4.9 g $ 0.01 Margarine 236 g $ 0.51 Sugar 177.5 g $ 0.16 Brown sugar 177.5 g $ 0.31 Vanilla extract 4.9 cm3 $ 0.30 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) The cookies are baked in a 2500 W home electric oven for ~30 minutes. Energy cost = 2.5 kW x 0.5 h x $0.12/kWh = $0.15/batch of cookies

Cost estimate (labor) Task Time used % work/time Chargeable time Preparation 0.50 h 100 0.50 h Baking 0.50 h 50 0.25 h Total 1.00 h 0.75 h Labor cost = $7.25/h x 0.75 h = $5.44/ batch of cookies

Cost estimate (total) 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 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