Problem Statement

Should Manna Bakery expand and

if expansion is done how much
revenue should they generate for
the expansion to be a feasible plan
?
Facts
 Increase in Rent : $ 48,000
 Renovation Charges : $ 30,000
Figures
1200000
contribution ratio
1000000

800000
Wholesale
Bakery
600000 wholesale 34%
37%
400000 deli Deli
bakery 29%
200000

0
Inferences from the case

Bakery products are generating more profit

compared to deli items and wholesale
business.
Alternative
 Stop making deli products.

 Focus only on bakery and wholesale

products.

 Elimination of space used for deli products.

 If considering for expansion
New cost= rent + renovation + cost of selling Deli
x (New number of seat/ existing number of seats)
Revenue = revenue of selling Deli x (New number of
seat/ existing number of seats)
New cost = 48,000 + 30,000 + 84,566x (number of required seats/12)

Revenue= 217,544 x (number of required seats/ 12)

For the break-even point, Revenue ‘minus’ New cost should be equal to
zero
If Expansion (continuation…)
 217,544 x (number of required seats/ 12) –
(48,000 + 30,000 + 84,566x (number of
required seats/12)) = 0

 Therefore, the minimum number of seats

should be 7.04
 Rounding of the nearest highest integer = 8

seats or 4 Tables
Team 40

Questions and comments

Team 40

Thank you!