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Brenholt: price up, volume down, fixed costs up
You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.
Case timer
00:00
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
Brenholt, a bakery chain in Germany, saw profit fall from EUR 4 million to EUR 2.85 million. Last year it sold 10 million loaves at EUR 3.00; this year it sold 9.5 million at EUR 3.10. Variable cost is EUR 1.80 per loaf in both years. Fixed costs rose from EUR 8 million to EUR 9.5 million. What drove the fall?
Format note: Candidate-led: you drive the analysis and ask for what you need; the interviewer answers only what you ask.
2. Answers to clarifying questions
Give these answers only if the candidate asks. If they ask something not listed, give a sensible answer or say it does not matter here.
If asked: Is variable cost per loaf the same in both years?
Answer: Yes, EUR 1.80.
If asked: What caused the rise in fixed costs?
Answer: Three new stores opened late in the year.
3. The hypothesis a strong candidate states
Listen for an early, testable guess like this one. It does not need to match word for word.
Both revenue and cost moved, so I will size each effect. My hypothesis is that the higher fixed costs, not the lower volume, drive most of the fall, because the price rise offsets much of the lost volume.
4. A model structure
Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.
- Split the profit change into revenue effects and cost effectsThis comes from profit = (price minus variable cost) x loaves, minus fixed costs: each part can move on its own, so size each one.
- Revenue change: volume effect and price effect
- Contribution change (price minus variable cost, times loaves)
- Key: Fixed-cost change
5. The working, step by step
Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.
Step 1: Revenue change
What a strong candidate does: Candidate: "I will start with revenue: 9.5 million loaves at EUR 3.10 this year against 10 million at EUR 3.00 last year." Revenue fell only EUR 0.55 million, but profit fell EUR 1.15 million, so something else moved as well.
Revenue change (EUR m): 9.5 × 3.1 - 10 × 3 = -0.55
Step 2: Volume effect
What a strong candidate does: The change in loaves times last year's price.
Volume effect (EUR m): (9.5 - 10) × 3 = -1.5
Step 3: Price effect
What a strong candidate does: The change in price times this year's loaves. Volume and price effects add up to the revenue change.
Price effect (EUR m): (3.1 - 3) × 9.5 = 0.95
Step 4: Contribution, last year
What a strong candidate does: Candidate: "The price rise carries no extra variable cost, so contribution may tell a different story from revenue. Is variable cost per loaf really unchanged?" Interviewer: "Yes, EUR 1.80 in both years." Contribution is loaves times (price minus variable cost).
Contribution last year (EUR m): 10 × (3 - 1.8) = 12
Step 5: Contribution, this year
What a strong candidate does: Contribution rose even though revenue fell, because the price rise goes straight to contribution on every loaf.
Contribution this year (EUR m): 9.5 × (3.1 - 1.8) = 12.35
Step 6: Profit bridge
What a strong candidate does: Candidate: "Contribution rose, so the fall must come from fixed costs." Interviewer: "Why does that matter for the client?" Candidate: "Because the fix is different: this is about the new stores, not about demand or price." Change in contribution minus change in fixed costs equals the change in profit.
Profit change (EUR m): (12.35 - 12) - (9.5 - 8) = -1.15
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
The EUR 1.15 million fall in profit comes from the three new stores' fixed costs, not from weak demand. First, revenue fell EUR 0.55 million, but the price rise more than made up for the lost loaves at the contribution level. Second, contribution actually rose, by EUR 0.35 million, because the price rise carries no extra variable cost. Third, fixed costs rose EUR 1.5 million with the three new stores, which explains the whole fall. Next, check whether the new stores are on track to cover their fixed costs, and find out why total loaves fell 5 percent even with more stores.
Risks a strong answer names: The new stores may need longer than a year to reach normal sales; Further price rises could cost more volume than this year's did.
Next steps: Track weekly sales and contribution at each new store; Compare loaves per store in old stores this year and last year.
Strong versus weak
A strong answer
Split revenue into price and volume, used contribution rather than revenue, and found that fixed costs drove the fall.
A weak answer
Saw revenue fall and recommended a marketing campaign to win back volume, missing that contribution had risen.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?
Total
0 out of 25
Score all five criteria to see the band and the feedback template.