Driving out to visit your grandfather in Puyallup, you stop by the Franz outlet store to pick up some road donuts and some day-old bread for the chickens. You’ve been troubled by what you have recently learned in a class on sustainability – that potentially up to 40% of food in the US is wasted. Knowing that people are still hungry in this country, you are hoping that you can figure out a way to improve this situation.

While picking up your donuts, you mention that you are going to visit your grandfather, and the chickens, so the manager gives you some bread that isn’t just old, but out-of-date, and not sellable to the general public. You wonder – can this be done on a larger scale? Unbeknownst to you, it already has!

Industry Background

Across the country, and here in our own backyard, smart, innovative businesspeople have recognized that they can play a crucial part in reducing the overall loss to the system from food production. Companies like Feed Commodities, LLC, of Tacoma, take bakery by-products, unused corn, wheat, milk and sugars from the production process as well as an unsellable finished product, and turn it into commercial livestock feed. This solves two sets of problems – use for food that otherwise might go to a landfill, saving both the bakery business money and reducing resources consumed; and high-quality food for animals, which becomes a marketing tool for the final customer.

By necessity, this type of production must take place somewhat regionally. Transportation costs are relevant to the size of the market that can be accessed by an individual processing plant, as well as knowledge and connection with the local market for the final feed product. However, it also requires a willingness to engage in a wide variety of business models, owing to the multiple steps involved in accessing, transporting, processing, and selling the end product.

Part 1 – Graphing Cost Functions

1) What are the fixed costs of this business?

2) What are the variable costs?

3) Develop and write down the total cost function for this business, according to the information given in the Excel worksheet. You need to decide if you want to look at costs per week, month, or year, and be consistent.

4) Create a graph of the total cost function.

5) What is the average cost function for this business?

6) Create a graph of the average cost function.

Answer rating: 100% (QA)

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