Description

You are a marketing consultant for a specialty coffee bistro and bakery. The business has been operating for about a year and is still not earning a profit. Your role is to determine the breakeven point and make recommendations on changes to one or more of the 4 P’s: Product, Price, Promotion, and Place.

The breakeven point (BEP) is the point at which total cost and total revenue are equal. A breakeven analysis calculates the BEP as:

Breakeven Point = Total Fixed Costs / (Unit Price – Unit Variable Cost) or BEP = F / (P-V)

In our example, the BEP = Total Fixed Costs / (Average Order Price – Variable Cost per Order). Using this formula, what is the breakeven point? In other words, how many orders would need to be sold before the business starts making a profit given the current price and cost structure?

Here’s the information you need to do the bistro’s BEP analysis:

Current Orders per Month

750

Average Order Price

$11.00

Variable Cost per Order

$5.00

Rent per Month

$2,000.00

Utilities per Month

$400.00

Labor per Month

$3,000.00

Calculate the BEP using the numbers and formulas above. Hint: total fixed costs in this case are the sum of rent, utilities and labor.

In order to be profitable, the business will need to either increase revenue or decrease expenses. Make three recommendations on changes to the Product, Price, Promotion and/or Place that would be likely to increase revenue, decrease expenses, or both. Be creative and have fun with your ideas!

Here are some examples of questions you could ask to help with your analysis:

What changes could be made to the product to reduce variable costs?

What changes could be made to prices to increase revenue, and how would you justify those price changes?

Is increasing price the only viable pricing strategy, or could lower prices lead to increased orders beyond the bistro’s BEP?

What changes could be made to promotions (e.g., advertising, discounts, sales, loyalty programs) to increase the number of orders per month, remembering that promotions are expenses?

After you calculate BEP, make three recommendations and be sure to explain why you believe your recommended changes could achieve the business objectives of reaching profitability by either increasing revenue or decreasing expenses, and recalculate the BEP based upon your recommendations to ensure that your recommendations result in profitability.

This is a PowerPoint presentation. There should be no complete sentences, only bullet points. There can be no more then 5 bullet points per slide and only 5 words per bullet point. There is no paper associated with this project, just a powerpoint presentation.

Scenario

Scenario

Breakeven Point

Recommendations Assignment

Scenario

You are a marketing consultant for a specialty coffee bistro and bakery. The business has been

operating for about a year and is still not earning a profit. Your role is to determine the breakeven

point and make recommendations on changes to one or more of the 4 P’s: Product, Price,

Promotion, and Place.

Breakeven Point

The breakeven point (BEP) is the point at which total cost and total revenue are equal. A breakeven

analysis calculates the BEP as

Breakeven Point = Total Fixed Costs/ (Unit Price – Unit Variable

Cost) or BEP = F/(P-V)

In our example, the BEP = Total Fixed Costs / (Average Order Price – Variable Cost per Order).

Using this formula, what is the breakeven point? In other words, how many orders would need to be

sold before the business starts making a profit given the current price and cost structure?

Here’s the information you need to do the bistro’s BEP analysis:

Current Orders per Month

750

Average Order Price

$11.00

Variable Cost per Order

$5.00

Rent per Month

$2,000.00

Utilities per month

$400.00

Labor per Month

$3,000.00

Calculate the BEP using the numbers and formulas above. Hint: total fixed costs in this case are the

sum of rent, utilities and labor.

Recommendations

In order to be profitable, the business will need to either increase revenue or decrease expenses.

Make three recommendations on changes to the Product, Price, Promotion and/or Place that would

be likely to increase revenue, decrease expenses, or both. Be creative and have fun with your ideas!

Here are some examples of questions you could ask to help with your analysis:

Ã¢â‚¬Â¢ What changes could be made to the product to reduce variable costs?

Ã¢â‚¬Â¢ What changes could be made to prices to increase revenue, and how would you justify those

price changes?

Ã¢â‚¬Â¢ Is increasing price the only viable pricing strategy, or could lower prices lead to increased

orders beyond the bistro’s BEP?

Ã¢â‚¬Â¢ What changes could be made to promotions (e.g., advertising, discounts, sales, loyalty

programs) to increase the number of orders per month, remembering that promotions are

expenses?

After you calculate BEP, make three recommendations and be sure to explain why you believe your

recommended changes could achieve the business objectives of reaching profitability by either

increasing revenue or decreasing expenses, and recalculate the BEP based upon your

recommendations to ensure that your recommendations result in profitability.

Assignment

Create a three slide Voice Thread presentation with a voice comment (three minutes maximum

length) that includes your BEP calculations and three recommendations on changes to the 4 P’s:

Ã¢â‚¬Â¢ Slide 1 – Introduction: include your name, instructor’s name, course, and assignment due date

Ã¢â‚¬Â¢ Slide 2 – Breakeven analysis

Ã¢â‚¬Â¢ Slide 3 – Three recommendations for changes to the 4 P’s

Grading Rubric

Category

Points%

Description

Documentation

and Formatting

20

12.5%

Quality work will include a multimedia presentation, using a tool of your choosing, with three slides and a voice

comment (three minutes maximum) explaining the BEP and three recommendations.

Organization

and

Cohesiveness

20

12.5%

Quality work will be clearly organized to show your progress through the formula which will provide a cohesive

transition to your recommendations.

Editing

20

12.5% Quality work will be free of any spelling, punctuation, or grammatical errors.

Content

100

Quality work will demonstrate an understanding of the breakeven analysis concept and will show correct calculations,

62.5% as well as an understanding of the 4 P’s. Recommended changes to the 4 P’s should be based upon the BEP and

clearly explained.

Total

160

100%

A quality paper will meet or exceed all of the above requirements.

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