Cost and Revenue Analysis for Bakery Business

in Nigeria
INTRODUCTION: As far as the development of the rural and urban areas in Nigeria is concerned, the role
of small and medium-scale enterprises (SMEs) cannot be underestimated. SMEs contribute to the
provision of employment opportunities and reduction in poverty in the country. One such enterprise
with a great prospect is bakery which produces foods such as bread (a staple), pie, buns and rolls.
Information gathered from the Association of Master Bakers and Caterers of Nigeria (AMBCN) has it that
over 1 million people are gainfully employed in the bread sub-sector of the industry both directly and
indirectly. Thus, funding the establishment of small-scale bakeries in Nigeria as part of a human
empowerment scheme will go a long way to reducing poverty in the country. Hence, the need to
undertake cost and revenue analysis to ascertain the viability of such an enterprise.

Assumptions of Financial Projections

 Bakery at inception shall focus on the production of small-size loaf of 400g

 Mixer and oven can mix/prepare 50kg of flour (1 bag) and bake the same in 1 hour
 1 bag of flour will produce 150 loaves of 400g of small sized bread
 Cost of 50kg bag of flour - #45,000.00
 Work hours per day – 3
 Number of work days per month – 15
 Period of financial projection – 1 year
 Capacity utilization – 90.0% (2.7 hours)
 Inventory of baked breads – Negligible
 The inflation rate remains below 30.0% in the next 1 year
 Maintenance & repairs (Plant & Machinery) – 10.0% pa on cost
 Depreciation (Plant & Machinery) – 15.0% pa on cost
 Company Income Tax – 0% Pa
 Baking equipment will be purchased at the Federal Institute of Industrial Research Oshodi
(FIIRO) at competitive rates
 Dealer’s price of 1 loaf - #280
 Market price of 1 loaf - #300
 Bakers – 2
Machine operators – 2
Factory workers (packaging) – 3
Driver – 1
Pro Forma Cost Analysis for the First Year of Production

Table 1.0

Expenses Amount (#) Number of Units Total (#)

Building rent 15,000 12 180,000
License (NAFDAC & SON 200,000 - 200,000
Approval)
CAC Registration 5,000 - 5,000
CAC forms 500 2 1,000
200 Load Bake Oven 1,100,000 200 1,100,000
25kg bread mixer 350,000 1 350,000
Bread moulder pan @ 3 7,200 3 21,600
Electric scale (150kg) 200,000 1 200,000
6/5KVA Diesel Generator 370,000 1 370,000
Deep freezer (Double 150,000 1 150,000
door)
One tricycle with 900,000 1 900,000
extended housing
Furniture 80,000 1 set 80,000
Heat extractor @ 2 30,000 2 60,000
Bread pan tray 120,000 1 120,000
Wire shelving 125,000 1 set 125,000
Maintenance & repair 331,500 - 331,500
Payment of salary:
• Bakers (2) 35,000 each × 2 12 months 840,000
• machine operators (2) 25,000 each × 2 12 months 600,000
• factory workers (3) 20,000 each × 3 12 months 720,000
• driver (1) 30,000 12 months 360,000
Raw materials, direct cost 4,100,000 - 4,100,000
of goods produced and
other operational
expenses

Total Operating Expenses = #10,814,100

Sales Forecast Based on Market Demand Data

Table 1.1: Monthly Sales Forecast in Thousands

Item M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12

Qty: 6 6 6 6 6 6 6 6 6 6 6 6

Price 280 280 280 280 280 280 280 280 280 280 280 280
/
unit:
Amoun 168 168 168 168 168 168 168 168 168 168 168 168
t 0 0 0 0 0 0 0 0 0 0 0 0

Total Revenue Projection in the year = #20,160,000

Pro Forma Profit and Loss Account

Table1.2

# Year 0 Year 1
Revenue - 20,160,000
Operating expenses - (3,137,500)
Machinery - (3,396,600)
Building + Rent - (180,000)
Other expenses - (4,100,000)
Total operating expenses - (10,814,100)
EBITDA - (9,345,900)
Depreciation - (509,490)
Net profit/(Loss) - 836,410
EBITDA Margin, % - 46.4%

 It is expected that when sales or demand increases, the cost of production will also increase.
TRAINING BUDGET
Organizing a training program for this empowerment scheme will equip beneficiaries with the
right skills to succeed after establishing their enterprises.
In this regard, a training budget has been created to ensure the smooth operation of the bakery
business training program. The training will be delivered to a cohort of 100 individuals in 12
modules indicating each stage in bread baking as enumerated below:
1. Scaling ingredients by using a formula expressed in baker’s percentages to ensure
consistency and uniformity of production.
2. Determination of the appropriate temperature of mixture and mixing of ingredients
into a smooth, uniform dough.
3. Bulk (primary) fermentation in the absence of oxygen (anaerobic reaction) using yeast.
4. Folding/punching to increase the strength of the gluten and de-gas the dough.
5. Diving the dough into desired portions by either mechanical or manual method.
6. Preshaping or rounding of dough into more consistent shapes.
7. Benching to allow the pieces to rest
8. Makeup and panning the dough into its final shape
9. Proofing (final) for final fermentation
10. Baking in the hot ovens and cooling the breads before packing
11. Storing to prevent starch retrogradation
12. Securing more funding for your bakery business
Target Group: Unemployed graduates and other less-privileged members of the society
Period of Training: 4 hours/day for 10 days
Mode: Group training
Requirements:
2 subject matter experts to administer the training (2 hours each per day)
Hall to host the training
Public address system
Writing materials
Advertisement
Equipment for practical demonstration
Welfare (snacks and soft drinks)

Training Budget Proposal

Unit cost (#) Number of days Total cost (#)

Trainer (2) 100,000 × 2 10 2,000,000
Hotel accommodation 50,000 × 2 per day 10 1,000,000
(2)
Hall 550,000/day 10 5,500,000
Public address system 10,000 10 100,000
Generator set (rent) 10,000 10 100,000
with fuel
Stationery (exercise 100,000 - 100,000
books and pens)
Advertisement 30,000 - 30,000
Training equipment rent 30,000/day 10 300,000
Welfare (snacks and soft 100,000/day 10 1,000,000
drinks)
Miscellaneous expenses 20,000/day 10 200,000
Estimated training cost 10,130,000

Projected Total Cost

Item Amount (#)
Estimated Business Expenses 10,814,100
Estimated Training Budget 10,130,000
Projected Total Expenditures 20,944,100