On January 14, 2012, Amy Bourgon, sole proprietor of Bake Me A Cake (BMAC), set out to make some decisions regarding the company’s future strategy. BMAC had grown and Bourgon was considering a move because she was unsure of how much more growth the current space could accommodate and wondered whether it was time to take the business to the next level. Bourgon needed to decide whether to renovate her family’s home or to lease a commercial location for the business.
Also, because Bourgon wanted to improve BMAC’s profitability, she was considering increasing cupcake prices; and she also wondered how BMAC should best advertise for fiscal 2012. Bourgon decided she would first analyze the company’s three-year financial performance and then project financial performance for fiscal 2012, depending on her decisions. She hoped to implement all changes before April 2012, when the next busy wedding season would begin.
You are a undergraduate accounting student who has offered to help Amy perform the necessary analysis. Use the following as a guide to assist in completing the assignment.
1. What are BMAC’s strengths and weaknesses?
2. Identify threats and opportunities in the industry.
3. Analyze the company’s statement of cash flows for the year ended December 31, 2011. 4. Analyze the relevant financial ratios for BMAC.
5. Outline the pros and cons of renovating the family home versus leasing a location. Complete a differential analysis for these two alternatives.
6. What are the advantages and disadvantages to increasing cupcake prices? Calculate the direct cost per cupcake. What would the contribution from cupcake sales be for the suggested price points?
7. Create an advertising strategy for the next fiscal year that meets Amy’s needs.
8. Recommend the
changes that Amy should make, based on your analyses.
9. Prepare a projected statement of earnings and balance sheet for the year ended December 31, 2012.
This report is to be written as a long business report (see D2L for various documents). It requires a cover page, executive summary, table of contents, introduction, body, conclusion, and appendices. Students will have a maximum of ten (10) pages, plus an additional five (5) pages of appendices available to present their analysis. The cover page, executive summary, and table of contents do not count toward the overall page count for the report.