Case Study: Fresh Bake

Background:

Fresh Bake has been operating in a suburban neighborhood for the past year. They sell a variety of
artisan breads, with their sourdough loaf being the most popular. Despite a growing customer base, the
owner, Jamie, wants to ensure the bakery's profitability and sustainability by understanding how changes
in sales volume, costs, and prices affect their profit.

Challenge:

Jamie seeks to determine the number of sourdough loaves that must be sold to break even each month.
Additionally, Jamie wants to explore how changes in selling price or costs will impact the bakery's break-
even point and overall profitability.

Data:

Selling price per loaf: $5

Variable cost per loaf (ingredients, packaging): $2

Fixed costs (rent, utilities, salaries): $4000 per month

Requirements:

1- Calculate the Contribution Margin

2- Calculate the Break-Even Volume
3- Analyze impact of change If Jamie decides to increase the selling price to $6
4- Analyze impact of change If the variable cost increases by $0.50 due to more expensive
ingredients
 Contribution Margin Income Statement

Total % of turnover
Turnover
- Variable costs:

= Contribution Margin

- Fixed costs:
= profit

Break-even point in turnover

Margin of Safety
Margin of Safety percentage

Comment:

If the Selling price increased to 6 euros

Total % of turnover
Turnover
- Variable costs:

= Contribution Margin

- Fixed costs:
= profit

Break-even point in turnover

Margin of Safety
Margin of Safety percentage

Comment:

If variable cost increased by 0.50

 Total % of turnover
Turnover
- Variable costs:

= Contribution Margin

- Fixed costs:
= profit

Break-even point in turnover

Margin of Safety
Margin of Safety percentage

Comment: