The British Parbaked Bread Ltd.

Founded in 2010 by its current CEO, Alisha Balasubramanian, The British Parbaked Bread Ltd. (BPB) manufactured parbaked bread in the United Kingdom. Since the start of its operations, BPB had experienced spectacular growth. In the fiscal year 2013 the firm's sales were £13 million. Prompted by the company's rapid growth, Alisha and Li Yan Chen - the firm's CFO - had decided to implement a new information system to measure BPB's performance on a monthly basis. In November 2013, Alisha and Li Yan met to analyze the first output of the new accounting system. Alisha was perplexed; she could not believe the Bread Division's performance for the previous month. The October income statement revealed that the division had experienced a loss of £62,000! In contrast, the company appeared to have earned a profit of £157,000 in September. And September could not have been the only month during the 2013 fiscal year where the firm earned substantial profits. The Bread Division's profit for that fiscal year (including September 2013) had been £1,120,000. The case provides a practical setting for illustrating how variance analysis can help better understand firm and divisional performance. The business situation described in the case could also lead to other interesting discussion points, most notably the role of incentive systems.