Bread and Butter Company (BBC) started its business a couple of years ago down when customers preferred bread to other food items in their breakfast. Today the market has seemingly turned narrow for bread or sandwiches. The high nutrient rich breakfast like corn meal, rice crisps and oats meal are taking over the market share as opposed to bread butter or a simple sandwich which appears to be aged old talks. BBC was about serving the kind of bread their customers wanted. The breads were custom made, ready in no time on order, and delicious, exactly how they need to be. The prices charged for the products offered were on high end since it was the only store of its kind in the area covering 50 kms of east Georgia. Georgians were fond of the unique service offered and the taste filled their morning experience with happiness. The business prospered and profits increased phenomenally on a year-to-year basis. The prosperity called for additional space and resource requirement. BBC contemplated that since they would have to hire more staff to meet the increasing demand and the space, they were trying to lease was more than what they could use, they planned for add-ons to their current production line breads and sandwiches. They started selling frozen food items, deserts, beverages, and meals for train passengers. The Bread and Butter Company was now known as Just Taste It (JTI). They started to hire new people with flawless cooking skills. There seemed to be more supply than the demand and it appeared that commoners had great cooking talent and were interested to learn more to take it to an altogether newer level. The staffs were welcomed to share their unique recipes and team gathered to prepare items based on the ones selected and approved. The employees started preparing meals on a prior anticipation of demand including excess meals for any stock outs. In a month or so, the warehouse seemed to be a chaos full of raw materials purchased from various suppliers based on suggestions of staffs and prepacked meals. The kitchen was out of space to accommodate the current staffs comfortably. The myriad ideas took JTI in a mirage creating problem in coordination among staffs since many of their ideas had to be dropped and others that were welcomed created a negative cost benefit equation. The bread and sandwich business was hit by the negative publicity of the train meals business since JTI had to compromise on quality to earn enough profit to keep the meal business up and running. Gradually the loyal clients turned down on them and started to switch to other caterers. The management of JTI was wondering if at all the business should be continued since there were not enough orders and the pre prepared meals are getting wasted thereby burdening the firm with huge costs. The frozen items, desserts and beverage business were the only support they had. Clients continued to buy those items considering frozen items, desserts and beverages were just bought and served to them on a margin. JTI ended up losing customers trust and had no other option but to stop preparing anything for them. They thought of bringing a changeover and presenting themselves as retailers rather than preparers of meals, breads and sandwiches. The management of the company was in desperate need of a savior that could prevent the demise of JTI. One of the management people, Mr. Juniorson contacted you and approached you for some valuable ADVICE in this regard. He also came up with their income and expenses (refer Annexure) so that you could provide some insights on how to overcome the loss-making situation and rebound back to a prosperous profit earning history. Required Consider yourself as a management accountant who was referred by one of the friends of Mr. Juniorson. He has following questions in his mind that clogged all doors of ideas to revive. Is there any way JTI could continue its current busineses.You see there was no dearth of loyal foodies when we use to sell just breads and sandwiches. Even though we charged high prices back then we never had to confront such predicaments we currently are in. Just Taste It Statement of Income (Amounts in 000) Year Ended December 31, 2019 2018 2017 Revenue Breads and sandwiches 41,000 45,000 49,000 Desserts and frozen food 92,000 79,000 68,000 Beverages 47,000 34,000 30,000 Meals 77,000 1,20,000 1,34,000 Total 2,57,000 2,78,000 2,81,000 Costs and Expenses Food items as raw materials 1,10,000 95,000 78,000 Ready-made frozen 33,455 28,727 24,727 Desserts purchased 46,920 40,290 34,680 Beverages purchased 39,048 42,857 46,667 Labor 40,000 35,000 31,000 Other operating expenses Rent 11,000 11,000 11,000 Insurance 5,000 5,000 5,000 Rewards to staffs 5,500 4,000 2,400 Packaging cost 4,000 3,400 2,800 Transportation cost for meal delivery 3,500 5,500 6,000 Total 2,98,423 2,70,774 2,42,274 Net Income -41,423 7,226 38,726 1. Since beverage market was competitive commanding high profit was never an expectation. 2. Frozen items were sold at a markup of 10% on purchase cost Georgian preferred frozen foods and fresh foods equally. 3. Desserts are all time favorite irrespective of seasonal variations. 4. Of the deserts and frozen revenue, 60% sale was dedicated to desserts. 5. 50% labor was identified towards meal preparation,40% towards sandwich and breads and rest 10% for serving desserts. Beverages did not take labor hours since they could be refilled in self-serving dispensers through which clients were served. Once they served themselves with their choice of beverage, they stood in lines to complete the billing of the service. 6. Of the cost of food as raw materials, only 40% was dedicated to earning bread and sandwich revenue. 7. Rewards to staffs were paid on basis of their recipes being approved. Product/ Service Wise Analysis ( ) Year Ended December 31, 2019 2018 2017 Revenue from breads and sandwiches 41,000 45,000 49,000 Less: Cost of food items 44,000 38,000 31,200 Less: Labor 16,000 14,000 12,400 Gross Profit -19,000 -7,000 5,400 Revenue from desserts 55,200 47,400 40,800 Less: Cost of desserts purchased 46,920 40,290 34,680 Less: Labor cost 4,000 3,500 3,100 Gross Profit 4,280 3,610 3,020 Revenue from frozen food items 36,800 31,600 27,200 Less: Cost of frozen food items 33,455 28,727 24,727 Gross Profit 3,345 2,873 2,473 Revenue from beverages 47,000 34,000 30,000 Less: Cost of beverage products 39,048 42,857 46,667 Gross Profit 7,952 -8,857 -16,667 Revenue from meals 77,000 1,20,000 1,34,000 Less: Cost of meals Food as raw material 66,000 57,000 46,800 Labor 20,000 17,500 15,500 Other operating cost directly identified 9,000 9,500 8,400 Profit -18,000 36,000 63,300