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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:
• 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.
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:
• Slide 1 – Introduction: include your name, instructor’s name, course, and assignment due date
• Slide 2 – Breakeven analysis
• 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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