Sugar and Spice Bakery: The Catering Opportunity
(4 pages of text)
In 2016, the owner of a small community bakery in Strathroy, Ontario, was planning the future of her business, since the lease on the store would expire soon. She was considering the financial feasibility of closing the bakery and focusing on only catering events. The bakery had not earned a profit as of late, and some local eateries were significant competitors. Running a bakery full time with two young children had been overwhelming at times, and she needed to consider a change to better manage her home and work life. She intended to continue withdrawing her annual salary of at least $40,000 under this catering-only option. She was concerned for the welfare of her four employees but also wanted to begin saving for her children’s education. This owner had to decide which option would be most appropriate for her needs.
This case best serves as an introduction to future-oriented decision-making and is appropriate for an introductory management accounting course at the undergraduate university level. After completion of the case, students will be able to
analyze business alternatives using the differential cash flow model;
- perform a qualitative analysis for the alternatives available to this business;
- establish which cash flows are relevant (future, cash, and different) for this company’s decision;
- calculate the return on investment and payback period for each of the alternatives; and
- reach a decision for this business, providing justification for the best alternative.
Accommodation & Food Services
Canada, Small, 2016
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