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Panera Bread Company: Flexible budget Three levels

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You will prepare a flexible budget for next year for the company of your choice (A bakery is my choice). The budget needs to be realistic and based on corporate and economic trends.

Set up the flexible budget at three levels for the income statement. Companies prepare budgets based on absorption and/or variable costing. Due to lack of information, we're limiting our budgeting to the absorption approach. You still need to estimate cost behavior based on trends.

Information to consider in determining the three levels.

What is the growth rate in sales for the past three years?
What is the current growth rate in the economy?
How are the competitiors doing?
Current interest rates and tax burdens.
Discuss the implications of the information after you have completed the flexible budget.
What did you learn ; and
How can you use this information as a manger?

Modular SLP Expectations

Always include the name or the organization(s), time period covered and source of information. It is important to answer the questions as posed. The discussion should be two to four pages and written in a clear and concise manner. Support your discussion with references in APA format. You are encouraged to use Excel or other compatible spreadsheet when computations are involved.

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Solution Preview

PANERA BREAD COMPANY

I have created a flexible budget for PANERA BREAD COMPANY (attached in Excel) which shows three levels of flexible budget. That is, there are three levels of expected activity and the expenses and revenues are adjusted to conform to expectations given those levels of activity.
What is the growth rate in sales for the past three years?

Review of Panera's 2011 financial statement (annual report from www.panerabread.com) shows that sales were up by 20% in the most recent year. They have been the beneficiary of two large macro trends : desire for better nutritional choices and down-grading from expensive restaurants. By being high quality food and modest cost, they have stolen market share. I expect that this will probably continue as healthy trends continue and the economy grows too slow for diners to upgrade back to ritzy culinary options. So, I have assumed "low"? as 5% increase, middle as the current growth of 20% and high of 30% growth.

What is the current growth rate in the economy?

The current growth rate in the economy is closer to 2% and Panera is clearly exceeding the overall economy by orders of magnitude. The reason is that they are benefitting like McDonalds from people having to downgrade from ...

Solution Summary

Your tutorial is 714 words plus a flexible budget for Panera Bread Company in Excel (see attached, click in cells to see computations) for three levels of sales. The flexible budget is based on 2011 actual Panera results.

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Strategic Analysis of Panera Bread Company

Strategic Alternatives and Recommended Strategy
1. Can the current or revised objectives be met through more careful implementation of those strategies presently in use (for example, fine tuning the strategies)?
2. What are the major feasible alternative strategies available to the corporation? What are the pros and cons of each? Can corporate scenarios be developed and agreed on? (Alternatives must fit the natural physical environment, societal environment, industry and corporation for the next three to five years).
a. Consider stability, growth and retrenchment as corporate strategies.
b. Consider cost leadership and differentiation as business strategies.
c. Consider any functional strategic alternatives that might be needed for reinforcement of an important corporate or business strategic alternative.

Recommended Strategy
1. Specify which of the strategic alternatives you are recommending for the corporate business and functional levels of the corporation. Do you recommend different business or functional strategies for different units of the corporations?
2. Justify your recommendation in terms of its ability to resolve both long and short-term problems and effectively deal with the strategic factors.
3. What policies should be developed or revised to guide effective implementation?
4. What is the impact of your recommended strategy on the company's core and distinctive competencies?
Implementation
A. What kinds of programs or tactics (for example, restructuring the corporation or instituting TQM) should be developed to implement the recommended strategy?
1. Who should develop these programs/tactics?
2. Who should be in charge of these programs/tactics?

B. Are the programs/tactics financially feasible? Can pro forma budgets be developed and agreed on? Are priorities and timetables appropriate to individual programs/tactics?
C. Will new standard operating procedures need to be developed?

Evaluation and Control
A. Is the current information system capable of providing sufficient feedback on implementation activities and performance? Can it measure strategic factors?
1. Can performance results be pinpointed by area, unit, project, or function?
2. Is the information timely?
3. Is the corporation using benchmarking to evaluate its functions and activates?
B. Are adequate control measures in place to ensure conformance with the recommended strategic plan?
1. Are appropriate standards and measures being used?
2. Are reward systems capable of recognizing and rewarding good performance?

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