Reference no: EM133418207

David is an owner of a bakery. He is quite concerned about her bakery as the revenue generated from sales are below the total costs of running the bakery. David asks for your opinion on whether he should close down the business or not. Additionally, he's already committed to paying for one year of rent, electricity, and employee salaries.

David's list of costs for the bakery is as follows:

A. January 2023, fixed costs:

Rent: $2,000

Utilities like electricity: $200

Employee salaries: $2500

Total January fixed costs: $ 4700

B. January 2023, variable expenses:

Cost of flour, butter, sugar, and milk: $1,500 for making 5000 breads

Total cost of labor: $1000

Water bill: 100

Total January variable costs: $2,600

Total revenue generated on average for last 3 month is $5000.

What suggestions would you give to David. Justify your answer by making calculations.