Season 3, Episode 7: In season 2, Kim Nelson, owner of Daisy Cakes, made a deal with Barbara Corcoran. This update on that deal emphasizes how sales have rapidly increased since that time, forcing Kim to move from a small kitchen with 4 ovens to a larger bakery with walk-in ovens. Now, she is able to expand production from baking 8 to 160 cakes at a time. Discuss the difference between fixed costs and variable costs in this clip with your students. Note that in the short-run the small kitchen and 4 ovens were fixed costs, but in the long run they are variable costs. Kim’s deal with Barbara has allowed her to expand her capital and have lower per unit costs due to economies of scale. Ask students to identify other costs involved with operating Daisy Cakes and categorize them as either fixed or variable costs.
