Scenario:

You are a marketing consultant for a specialty coffee bistro and bakery. The business has been operating for about a year and is still not earning a profit. Your role is to determine the breakeven point and make recommendations on changes to one or more of the 4 P's: Product, Price, Promotion, and Place.

Breakeven Point

The breakeven point (BEP) is the point at which total cost and total revenue are equal. A breakeven analysis calculates the BEP as:

Breakeven Point = Total Fixed Costs / (Unit Price - Unit Variable Cost) or BEP = F / (P-V)

In our example, the BEP = Total Fixed Costs / (Average Order Price - Variable Cost per Order). Using this formula, what is the breakeven point? In other words, how many orders would need to be sold before the business starts making a profit given the current price and cost structure?

Here's the information you need to do the bistro's BEP analysis:

Current Orders per Month	750
Average Order Price	$11.00
Variable Cost per Order	$5.00
Rent per Month	$2,000.00
Utilities per Month	$400.00
Labor per Month	$3,000.00

Calculate the BEP using the numbers and formulas above. Hint: total fixed costs, in this case, are the sum of rent, utilities, and labor.

THIS IS MY BREAKEVEN ANAYLSIS IS THIS CORRECT?

The Breakeven Point would consist of the Total Fixed Cost/( Average order Price - Variable cost per order) = [5400 / (11-5)] units = 900 units

Given the current orders per month would equal to 750 units

900 -750 = 150 units

The specialty coffee bistro and bakery company is currently producing 150 units less to reach the breakeven point of 900.

In order to be profitable, the business will need to either increase revenue or decrease expenses. Make three recommendations on changes to the Product, Price, Promotion and/or Place that would be likely to increase revenue, decrease expenses, or both. Be creative and have fun with your ideas!

Recommendations

1. What changes could be made to the product to reduce variable costs? NEED HELP

2. What changes could be made to prices to increase revenue, and how would you justify those price changes?

My answer here: By creating attractive product and service bundles, bistro would able to convince customers to purchase a higher-end offer or sell them additional products and services. This will raise the average profitability of customers and lower the number of customers that would be needed to break even.

3. Is increasing price the only viable pricing strategy, or could lower prices lead to increased orders beyond the bistro's BEP? NEED HELP

After you calculate BEP, make three recommendations and be sure to explain why you believe your recommended changes could achieve the business objectives of reaching profitability by either increasing revenue or decreasing expenses and recalculate the BEP based upon your recommendations to ensure that your recommendations result in profitability.