MAF551

MANAGEMENT ACCOUNTING AND CONTROL

CASE STUDY PACKAGE

Introduction
It all started 10 years ago when Siti was still single during her early twenties when she just
graduated. She had always been passionate about baking. She loved spending her free time
in the kitchen, experimenting with different recipes and creating delicious treats for her family
and friends. Her passion for baking had started as a hobby, but over time, she began to wonder
if it could become something more.
One day, a friend asked Siti to bake a cake for her daughter's birthday party. Siti put all her
baking skills to use and made a beautiful cake that was the talk of the party. Several guests
asked if she could bake cakes for their own events. This gave Siti an idea - what if she turned
her passion for baking into a business?
Siti began by selling her baked goods at local farmers' markets and online. She started with
simple products like cupcakes and cookies, and over time, she expanded her offerings to
include custom cakes and desserts for weddings and other special events. Her business
quickly grew as word spread about her delicious and beautifully designed treats.
As her business grew, Siti realized that she needed a physical location to better serve her
customers. She found a small storefront in a busy shopping district and transformed it into a
charming bakery. She decorated the space with her own personal touch and began to attract
a loyal following of customers who loved her baked goods and friendly service.
As her business continued to grow, Siti faced new challenges. She had to manage a team of
bakers and staff, invest in new equipment and supplies, and navigate the complexities of
running a small business. But despite the challenges, Siti remained committed to her passion
for baking and providing her customers with the best possible experience.
Years later, Siti's bakery had become a beloved institution in her community. She had
expanded her business to include several locations across the city and had even started to
sell her baked goods in grocery stores and online. Her business had become a true success
story, and it all started with a passion for baking and a willingness to take a chance on turning
that passion into a business.
Company Background
Artisan Bakeshop is a medium business that specializes in baked goods such as bread, cakes,
and pastries. Siti made a big decision almost 10 years ago to pursue her hobby into becoming
a business. She started the bakery in her home kitchen with a small oven and a few baking
supplies. At present, she owned 4 branches of outlets. The main bakery shop is in Shah Alam
and the other 3 outlets are in Subang Jaya, Putrajaya and Bangi.
The vision of the company is to be the leading bakery in the community, known for delicious
and innovative products, exceptional customer service, and commitment to supporting local
suppliers.
The mission of the company is to provide customers with the highest quality baked goods
made from fresh, locally sourced ingredients, and to create a warm and inviting atmosphere
where everyone feels welcome. Both vision and mission reflect the values and long-term goals
and clearly communicated to employees and customers of Siti.
In the first couple of years of the business, Siti focused on perfecting her recipes and building
her customer base. She started by selling her baked goods at local markets and through word
of mouth. As the business grew, she started to receive orders from local cafes and restaurants.
Artisan Bakeshop also launched a website and started selling its products online.
In the third year of the business, Artisan Bakeshop had grown significantly. Siti had hired
additional staff to help with baking and delivery. She had also rented a small commercial
kitchen to accommodate their growing business. She expanded their product offerings and
started selling specialty cakes for weddings and other events. She also started to attend trade
shows and industry events to network and build new business relationships.
By year six, Artisan Bakeshop had become a well-established business in the market. She
had a loyal customer base and a strong reputation for quality baked goods. They had
expanded the operations from Shah Alam to other three locations in Selangor, with a central
bakery and several retail locations. The company had also invested in new equipment and
technology to improve production processes and increase efficiency. Artisan Bakeshop
continued to innovate new products and flavours and developed a strong brand presence both
locally and online. The business will take up investment opportunity that generates 50%
benefits.

Organizational Structure
1. Ownership and Management: Siti is the owner of the Artisan Bakeshop and is
responsible for the overall management of the business. She makes all major
decisions regarding the direction of the bakery and is responsible for its financial
performance.
2. Employees: Artisan Bakeshop has 4 separate teams of 10 employees each in 4
different outlets who work in various roles, including bakers, pastry chefs, customer
service representatives, and delivery drivers. Each employee has specific
responsibilities and is expected to perform their duties to the best of their abilities.
3. Departments: Artisan Bakeshop is organized into three main departments:
Production Department: This department is responsible for the actual production of the
baked goods. It includes the bakers and pastry chefs who create the delicious treats
that the bakery is known for.
 Sales and Marketing Department: This department is responsible for promoting the
bakery's products and services to potential customers. It includes customer service
representatives who handle orders and inquiries, as well as marketing specialists who
develop and execute marketing campaigns.
Operations Department: This department is responsible for the day-to-day operations
of the bakery, including inventory management, delivery logistics, and accounting. It
includes administrative staff who handle tasks such as bookkeeping, payroll, and HR.
4. Organizational Structure: The bakery has a hierarchical organizational structure, with
Siti as owner and the manager in the Shah Alam outlet, while she is being assisted by
3 other managers for the other 3 other outlets. The departments are organized under
them, with the department heads reporting to Siti. Each employee has a specific role
and reports to their respective department head.

Business Challenges
Artisan Bakeshop faces several challenges that can make it difficult for businesses in the
baking industry to succeed. For the past 10 years of doing business, some of the key
challenges in the baking industry that the company has experienced include:
1. Cost of ingredients
It is a significant challenge for many bakeries, especially those that use high-quality
ingredients. The cost of ingredients can fluctuate due to a variety of factors, including
supply and demand, weather conditions, and transportation costs. This can make it
difficult for Artisan Bakeshop to predict and manage their costs, which can impact their
profitability.
 In addition, many high-quality ingredients, such as butter, flour, and sugar, are subject
to price volatility due to global market forces. For example, a drought or other weather
event can lead to a shortage of wheat or other crops, which can drive up the cost of
flour and other baking ingredients. Similarly, transportation costs, such as fuel prices
or shipping fees, can impact the cost of ingredients and make it difficult for bakeries to
maintain consistent pricing.
Another challenge related to the cost of ingredients is the need for consistent quality.
To produce high-quality baked goods, Artisan Bakeshop must use high-quality
ingredients that meet certain standards. However, maintaining this quality can be
expensive, as it often requires working with trusted suppliers and conducting regular
quality checks.

2. Labor costs
Labor costs are a significant challenge for many Artisan Bakeshop, particularly those
that produce high-quality baked goods. Baking is a labour-intensive industry, and
skilled bakers and pastry chefs can be expensive to hire and train. In addition, the
company operates with thin profit margins, which can make it difficult to offer
competitive wages and benefits to employees.
The cost of hiring and training skilled employees, Artisan Bakeshop must also consider
the cost of retaining those employees. Skilled bakers and pastry chefs are in high
demand, and may be tempted to leave their current job for a higher-paying opportunity
elsewhere. This can create instability and turnover, which can be disruptive and costly
for the company.
Another challenge related to labor costs is the need for ongoing training and
development. Baking is a craft that requires continuous learning and improvement, and
bakeries must invest in training and development programs to ensure that their
employees stay up-to-date with new techniques and trends. This can be costly and
time-consuming, and may require additional investment in equipment and materials.

3. Changing consumer preferences

Artisan Bakeshop faces challenges in meeting the diverse and evolving preferences
of customers. Consumer preferences for baked goods can vary widely based on
factors such as age, culture, geography, dietary restrictions, and personal tastes. As a
result, bakeries must offer a wide range of products to appeal to a broad customer
base.

One of the biggest challenges related to customer preferences is the need to stay
current with changing trends and tastes. Customers may be influenced by factors such
as health and wellness trends, cultural influences, and social media, which can create
demand for new and innovative products. However, keeping up with these trends can
be challenging for the company, particularly smaller or independent operations with
limited resources.
 Another challenge related to customer preferences is the need to cater to dietary
restrictions and preferences. Many customers have specific dietary requirements, such
as gluten-free, vegan, or low-sugar diets, and expect bakeries to offer products that
meet their needs. However, developing and producing these specialized products can
be costly and time-consuming, and may require additional investment in equipment
and ingredients.

4. Health and safety regulations

Artisan Bakeshop faces significant challenges related to health and regulations, as the
production and sale of baked goods is subject to a wide range of laws and regulations
related to food safety, labelling, and packaging. Compliance with these regulations can
be complex and costly, particularly for smaller or independent bakeries with limited
resources.

One of the biggest challenges related to health and regulations is ensuring compliance
with food safety standards. Artisan Bakeshop must follow strict guidelines related to
the handling, preparation, and storage of ingredients to prevent contamination and
foodborne illness. This can require investment in specialized equipment and training
for employees, as well as ongoing monitoring and testing to ensure compliance.

Another challenge related to health and regulations is meeting labelling requirements

for ingredients and nutritional information. Many customers are increasingly concerned
about the ingredients and nutritional content of the foods they consume and expect
clear and accurate labelling of baked goods. Compliance with these requirements can
be challenging, particularly for products with multiple ingredients or that are produced
in small batches.
 In addition to these challenges, the company is also subject to evolving regulations
related to environmental sustainability and waste reduction. Many customers are
increasingly concerned about the environmental impact of the foods they consume and
expect the company to adopt sustainable practices and reduce waste. Compliance
with these regulations may require investment in new equipment and processes, as
well as ongoing training and education for employees.

5. Competition

Artisan Bakeshop is highly competitive, with many players ranging from small
independent bakeries to large chain stores. Differentiating its products and marketing
efforts can be a challenge, especially in markets where there are many options
available to consumers.
The company faces significant challenges related to competition, as the market for
baked goods is highly competitive and constantly evolving. With the availability of
various baked goods options, customers have a wide range of choices when it comes
to purchasing baked goods, and bakeries need to constantly differentiate themselves
to remain competitive.
One of the biggest challenges related to competition is the need to constantly innovate
and differentiate product offerings. With so many options available, customers are
increasingly looking for unique and differentiated products that meet their specific
preferences and dietary requirements. This can require investment in research and
development to create new recipes or product lines, as well as ongoing monitoring of
customer feedback and preferences to ensure that offerings remain relevant and
attractive.
Another challenge related to competition is the need to manage pricing and margins
in a competitive market. With so many options available, customers have become
increasingly price-sensitive, and Artisan Bakeshop may need to adjust pricing to
remain competitive. However, adjusting pricing can be challenging, as it can impact
margins and profitability, and may require careful analysis of costs and pricing
strategies.
In addition to these challenges, competition can also impact marketing and sales
strategies, as the company may need to invest in marketing and advertising campaigns
to promote their products and differentiate themselves from competitors. This can
require investment in branding, social media marketing, and other promotional efforts,
as well as ongoing monitoring of competitor activities and market trends to ensure that
marketing efforts remain relevant and effective.
6. Seasonal demand
Artisan Bakeshop faces significant challenges related to seasonal demand, as demand
for baked goods can vary widely throughout the year depending on factors such as
holidays, special events, and weather. Managing seasonal demand can be challenging
for bakeries, particularly smaller or independent operations with limited resources.
One of the biggest challenges related to seasonal demand is managing inventory
levels and production schedules to meet fluctuating demand. During peak seasons,
such as the holiday season or special events, bakeries may need to increase
production and stock levels to meet demand. However, during slower seasons, excess
inventory can become a burden, leading to waste and increased costs.
Another challenge related to seasonal demand is the need to adapt product offerings
to meet changing customer preferences and demands. During peak seasons,
customers may have specific preferences for products or flavours that may not be as
popular during other times of the year. As a result, Artisan Bakeshop may need to
invest in new equipment, ingredients, or production processes to meet these seasonal
demands, which can be costly and time-consuming.
In addition to these challenges, seasonal demand can also impact labour costs, as
bakeries may need to hire additional staff or adjust schedules to meet peak demand.
This can create additional costs and complexities related to training, scheduling, and
management.
Financial Performance

Artisan Bakeshop Income Statement (Shah Alam Outlet) RM

Sales Revenue 150,000

Cost of Goods Sold (45,000)

Gross Profit 105,000

Operating Expenses

Rent (12,000)

Salaries (30,000)

Supplies (10,000)

Utilities (3,000)

Insurance (1,500)

Marketing and Advertising (5,000)

Depreciation (1,000)

Total Operating Expenses 62,500

Net Income Before Taxes 42,500

Income Tax Expense (8,500)

Net Income 34,000

For the year ended 2023, Artisan Bakeshop generated RM150,000 in sales revenue. The cost
of goods sold, which includes the cost of ingredients, packaging, and labour responsible to
produce the baked products, was RM45,000. This leaves a gross profit of RM105,000, which
is the revenue remaining after deducting the cost of goods sold.
The bakery shop also incurred operating expenses of RM62,500 during the period. These
expenses include rent, salaries, supplies, utilities, insurance, marketing and advertising, and
depreciation. All operating expenses is fixed except utilities expense which costs 2% of the
sales revenues. After deducting these expenses from the gross profit, the bakery shop has a
net income before taxes of RM42,500 for the period.
The bakery shop also incurred an income tax expense of RM8,500, resulting in a net income
of RM34,000 for the period.
Future prospects
Artisan Bakeshop is looking forward to making sure the business keeps on growing and served
the community in the market. The company is considering implementing some of these
strategies for future prospects.
1. Expansion: A bakery shop that has established a loyal customer base and strong
reputation in its community may consider expanding to other locations to reach new
customers and increase revenue.

2. Diversification: A bakery shop may consider expanding its product offerings to include
new items that appeal to a wider range of customers, such as gluten-free or vegan
baked goods.

3. Online sales: A bakery shop may consider selling its baked goods online to reach a
broader audience and increase sales.

4. Catering and events: A bakery shop may consider offering catering services for
weddings, parties, and other events to increase revenue and expand its customer
base.

5. Franchising: A successful bakery shop may consider franchising its business model to
expand its brand and reach new markets.

6. Innovative marketing: A bakery shop may explore new and innovative marketing
strategies, such as social media advertising, influencer marketing, or promotional
collaborations with other businesses to attract new customers and increase revenue.

7. Product development: A bakery shop may consider developing new products that align
with current food trends or seasonal offerings to attract customers and stay relevant in
a competitive market.
END OF CASE STUDY