Entrepreneurship and Small Business Management (MNE3701)
Institution
University Of South Africa (Unisa)
Book
Small Business Management
MNE3701 Assignment 4 (DETAILED ANSWERS) Semester 2 2024 - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED - DISTINCTION GUARANTEED Answers, guidelines, workings and references... Having acquired sufficient knowledge and skills on financial management for small business, you must demonstrate practic...
Entrepreneurship and Small Business Management (MNE3701)
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MNE3701
Assignment 4 Semester 2 2024
Unique number:
Due Date: 11 October 2024
Detailed solutions, explanations, workings
and references.
+27 81 278 3372
, QUESTION 1 (2 ANSWERS PROVIDED)
Applying a Pricing System for "Fresh Eats Bistro"
Introduction
"Fresh Eats Bistro" is a small, health-conscious eatery located in Randburg that
specializes in serving fresh, organic, and locally sourced meals. The business aims
to promote sustainable living while offering high-quality food. As a new
entrepreneur, one of the most critical tasks for the success of the bistro is
determining an effective pricing system. Pricing affects not only profitability but also
customer perception, demand, and competitive positioning. In this discussion, I will
apply a pricing system to "Fresh Eats Bistro," using break-even analysis, markup
pricing, and various pricing strategies to ensure both profitability and market
acceptance.
Break-Even Analysis
Break-even analysis is an essential tool for determining the minimum sales volume
required to cover both fixed and variable costs. For "Fresh Eats Bistro," this
involves examining the costs associated with ingredients, labor, rent, utilities, and
other operating expenses. Suppose the bistro’s fixed costs, which include rent,
utilities, and administrative expenses, amount to R50,000 per month. Additionally,
variable costs (ingredients, packaging, etc.) for each meal average R40.
To conduct a break-even analysis, we must also set a price for each meal. Let’s
assume the average price per meal is R90. Using the break-even formula:
Break- even point (in units)
= Fixed Costs/(Selling Price per Unit−Variable Cost per Unit
= 50,000/(90−40) =1,000 meals
This means that "Fresh Eats Bistro" must sell 1,000 meals per month to cover its
fixed and variable costs. Any sales beyond 1,000 meals will generate profit. By
conducting this analysis, I can determine how many meals need to be sold to
achieve profitability and adjust the pricing structure accordingly.
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