2. Provide an alternate set of calculations (in contribution format by course) to provide further insight to Sophie on the profitability of each of the proposed culinary courses. a. The per student cost calculation of $298 for all courses is a gross average based on a number of assumptions and grouping of all costs. b. Advertising and Marketing costs are treated as common costs and shared equally. c. Use the concept of traceable costs and cost drivers to directly assign or allocate the applicable Fixed and Indirect costs to the courses. d. Identify what costs are truly common or shared and should not be assigned to the courses. e. Without changing the number of courses or students or pricing what is a more accurate profitability of each of the courses? 3. What price per student per course is necessary for Sophie to at least break even? 4. Suggest some strategic and operational factors that Sophie should consider to improve the profitability of LBEC before going ahead with the project. For example: a. Pricing strategy of the different courses - target markets, competition, etc. Should it be the same for all courses? b. What is Sophie's target profitability or expected return? c. Competitive analysis of the Montreal culinary training market. What are cross marketing possibilities? Are there government grants or training funding available? d. What are some potential financial and non-financial KPIs and measures that could be used to evaluate performance and success?

Case 4: Le Bleu Ecole de Cuisine Case Study 4; Le Bleu Ecole de Cuisine (LBEC) (Chapter 5 Activity Based Costing; Chapter 11 Decision Making with a Strategic Emphasis} Not for nothing was Sophie Brazier, an acclaimed Michelin star chef. Coming from a family of culinary experts dating back three generations, it was Sophie's great grandmother who was an inspiration behind her great grandfather becoming a famous chef during a time when women were hardly recognized in this profession. Sophie was not only a great chef but also had the rare ability to share her knowledge and skills by training young budding cooks. One ne spring morning, in April 2020, from her beautiful waterfront home in Montreal, when the world was crippled due to the COVE-19 pandemic, Sophie started to formalize her longtime dream of setting up a culinary institute to offer various courses to train and improve participants' culinary skills. She took some notes on the type of courses that she might be passionate about and in a moment of creative ourish, coined a name for the institute (Le Bleu Ecole de Cuisine) and also some names and descriptions for the cooking courses she wished to offer (Table 1). One of her broad strategic goals is to bring cooking to the corporate world and to the community. She wished to offer week-end courses to employees to learn healthy cooking, while also having fun. She also wished to offer a similar program for the young kids and community at large, which potentially could bring back the health and fun element to cooking. She deeply detested the fast food culture and held the view that it was singularly responsible for many modem-day malaises. Her mission was to bring the joy of delightful cooking and mindful eating back into everyone's lives. Over the next couple of weeks, she held web-conferences with her tax accountant and shared broad details about the type of courses on offer, in terms of its duration, scheduling, and so on {Table 1). She also carried out extensive research to come up with an estimate of costs with the help of her tax accountant (Table 2). She realized that not all of these costs may be applicable for all courses that she intended to offer, however being unsure how to organize those costs and revenues to calculate protability, she relied on her tax accountant. She did place a higher emphasis on Advertisingmlarketing costs with a greater focus on Corporate clients and Over the next couple of weeks, she held web-conferences with her tax accountant and shared broad details about the type of courses on offer, in terms of its duration, scheduling, and so on {Table 1). She also carried out extensive research to come up with an estimate of costs with the help of her tax accountant (Table 2). She realized that not all of these costs may be applicable for all courses that she intended to offer, however being unsure how to organize those costs and revenues to calculate protability, she relied on her tax accountant. She did place a higher emphasis on AdvertisingWIarketing costs with a greater focus on Corporate clients and Communityi'Young weekend participants. She was also particular that cleaning and maintenance be carried out throughout the year to maintain good hygienic discipline. Since she wanted to make this affordable to most participants, she was keen to peg the fees at $399 per participant, as course fees. Thereon she commissioned her tax-accountant to estimate the protability of the institute and if possible, individual courses. Sophie's tax-accountant reverted in a week's time and reported a broad summary of operations and protability {Table 4} and a cost per student (Table 3). In his calculations, although the individual courses looked protable with a positive contribution margin, overall LBEC was projected to make a loss of C$ 152,260.00 in the first year of operations. This unnerved her no end. Despite the fact that Sophie was passionate about cooking and sharing her skills, she was not yet ready to make such a signicant investment of her personal time and resources for a loss-making operation Her conversations with the tax accountant was not enlightening or encouraging either. For example, she was not sure why the accountant combined many of the costs as common costs ($264,900) and not related it to the individual course groups. She also felt that the cost per student ($298} across all the courses, did not appear light. That is when she remembered her dearest high school friend, Sonu Mani, who herself went on to become a meritorious CPA graduate and now a senior partner with one of the Big 4 rms. She immediately got on phone with Sonu, who was enjoying a bit of respite amidst her radically changed schedule due to the COWB- 19 pandemic. It was now left in Sonu's safe hands to save Sophie's worthy culinary institute! Table 1 - Culinary courses Name Targeted market Duration Duration # of courses # of students Segment details planned per per course year Juste pour le Fun (team building) Weekends 2 days a 30 10 fun (CSR) cooking lessons for week/ 6 organizations and its hours a day employees as part of their CSR initiative Le week-end Lessons for young Weekends 2 days a 30 10 Cours kids/community members week/ 6 who are learning how to hours a day cook, with a focus on healthy meals Jeune Chef Individual lessons for 4 weeks 3 days a 13 20 professionals/semi- week, 2 professionals who aspire to hours a day become better rated chefs Groupe Group lessons for amateur 4 weeks 3 days a 13 20 Classe groups, who wish to enroll week, 2 - cuisson together as friends/family hours a day rapide and learn some quick cooking skills for everyday mealsTable 2 (Costs) Costs heading Description Cost Type Activity Remarks driver Grocery, produce and For 4-week courses, per Direct/Variable Number of other food items student/per hour $10 costs students Grocery, produce and For weekend courses, per Direct/Variable Number of other food items student/per hour $5 costs students Course Materials For all courses, $ 40 per Direct/Variable Number of student costs students Lunch & Per day per student, $40 Direct/Variable Number of Only for weekend Refreshments costs students courses Instructor's Instructor's compensation Direct/Variable Number of compensation details: per instructor costs Instructional hour, $60 hours 20 Cooking stations $5000 each; Useful life Indirect/Fixed Number of Depreciation is a 10 years; No salvage Costs student hours factor of the extent of value. Cost $100,000 student usage Equipment/Cutlery, $2000 per cooking station | Indirect/Fixed Number of Depreciation is a etc. for the cooking Costs student hours factor of the extent of stations student usage Utilities $2500 per month Indirect/Semi Number of Utility consumption is Variable student hours a function of students' presence/usage Communication Costs | $1000 per month Indirect/Semi Common Cannot be traced to Variable costs course groups Rental Costs $8000 ner month Indirect/Fixed Number of Snare lisaon is aRental Costs $8000 per month Indirect/Fixed Number of Space usage is a Costs student hours function of students' presence Insurance costs per $5000 Indirect/Fixed Common Cannot be traced to year Costs costs course groups Cleaning & 3 hours per day; 365 days Indirect/Fixed Number of Cleaning/maintenance Maintenance $20 per hour Costs student hours requirements is a function of students' presence and usage of facilities Advtg/Mktg Marketing and Direct/Fixed Number of See note below Advertising costs are Costs courses which approximately $1000 per can be course offering or $86000 translated to per per year studentNote: The strategic goal is to increase the demand for week-end courses as it is yet an untapped market; The fees for such courses can also be increased and there may be cross marketing opportunities of the 4-week courses. Hence Advtngarketing Sr. Promotional expenses for the weekend programs {on subsequent verication, after the tax accountant nalized the projections) may work to be nearly $1250 per weekend course offering, and the balance can be allocated for the 4-week courses Table 3 (Cost per student calculations) Dollar Remarks Cost heading amount Culinary Instructor's Per instructor hour = $60 compensation 80,640 Lunch & Per students 540 >> 600 students \"' 2 days * $40 = $48,000 Refreshments (only for weekend courses) 48,000 Course Materials 44,800 Per student = $40>>1120 students * $40 For 4-week courses, per smdentl'per hour $10 >> 260+2I50 students * 3 days ' 2 hours *4 weeks" $10 Grocery, Produce and For week-end courses, per student'per hour $5>> 300+300 other food items 160,800 students \"' 2 days \" 6 hours * $5 Total $334,240 Number of students I 1120 Cost per student $298 Table 4 (Revenue/Profitability projections) Le Bleu Ecole de Cuisine Revenue / Profit Projections Juste pour le Le week-end Groupe fun (CSR) Cours Jeune Chef Classe Total Volumes: Culinary instructor hours 360 360 312 312 1,344 Expected student enrolments 300 300 260 260 1,120 # course offerings per year 30 30 13 13 86 Per $399 $399 $399 $399 Student: Fees Cost (Refer Table 3) 298 298 298 298 Contribution ($) $101 $101 $101 $101 Contribution (%) 25% 25% 25% 25% Total: Contribution $30,171 $30,171 $26,149 $26,149 $112,640 Common Costs Depreciation 14,000 Utilities 30,000 Communication Costs 12,000 Rental Costs 96,000 Insurance Costs 5,000 Cleaning and Maintenance onnJuste pour le Le week-end Groupe fun (CSR) Cours Jeune Chef Classe Total Volumes: Culinary instructor hours 360 360 312 312 1,344 Expected student enrolments 300 300 260 260 1,120 # course offerings per year 30 30 13 13 86 Per $399 $399 $399 $399 Student: Fees Cost (Refer Table 3) 298 298 298 298 Contribution ($) $101 $101 $101 $101 Contribution (%) 25% 25% 25% 25% Total: Contribution $30,171 $30,171 $26,149 $26,149 $112,640 Common Costs Depreciation 14,000 Utilities 30,000 Communication Costs 12,000 Rental Costs 96,000 Insurance Costs 5,000 Cleaning and Maintenance Costs 21,900 Advertising and Marketing 86,000 264,900 Profit (loss) before taxes $(152,260)Purpose of Case LBEC is a culinary institute proposed by Sophie Brazier, a famed Michelin star chef. Based on her vision and research, which she shared with her tax accountant, a revenue and profitability projection was prepared by the latter for the first year of operations. It appears that the business would suffer a loss of $152,260 and Sophie has requested a review the financial information. Requirements You are expected to review the financial information and prepare a report for Sophie Brazier with recommendations. 1. Critically examine the calculations and projections made by tax accountant. The tables are all provided in an Excel worksheet on Brightspace. 2. Provide an alternate set of calculations (in contribution format by course) to provide further insight to Sophie on the profitability of each of the proposed culinary courses. a. The per student cost calculation of $298 for all courses is a gross average based on a number of assumptions and grouping of all costs. b. Advertising and Marketing costs are treated as common costs and shared equally. c. Use the concept of traceable costs and cost drivers to directly assign or allocate the applicable Fixed and Indirect costs to the courses. d. Identify what costs are truly common or shared and should not be assigned to the courses. e. Without changing the number of courses or students or pricing what is a more accurate profitability of each of the courses? 3. What price per student per course is necessary for Sophie to at least break even? 4. Suggest some strategic and operational factors that Sophie should consider to improve the profitability of LBEC before going ahead with the project. For example: a. Pricing strategy of the different courses - target markets, competition, etc. Should it be the same for all courses? b. What is Sophie's target profitability or expected return? c. Competitive analysis of the Montreal culinary training market. What are cross marketing possibilities? Are there government grants or training funding available? d. What are some potential financial and non-financial KPIs and measures that could be used to evaluate performance and success