Jet Task 2

In: Business and Management

Submitted By jessicathorpe
Words 2148
Pages 9
A1. Budget planning is in essence the process of forecasting and determining a company’s financial goals for both the long term and short term.
Competition Bike, Inc. has come up with a budget schedule for year 9 operations. Based on its previous years and past financial numbers there are several areas of concern. First research and development is a concern because in the years that they invested more money in research and development it seemed sales where at its highest. Research and development is what keeps you ahead of the competition and what helps you keep your place in the market. By always having the latest and greatest in products and technology you will help secure and keep more customers and retain your spot in the niche market. For year 7, $98, 280 was spent on research and development and that is the year when the company made the most in sales. In year 8 the budget dropped by $16,000 to only $82284. This is the year were sales decreased and was stagnant. For year 9 the budget is only $85,232 not too much higher from the year before. This amount in my opinion is too low because if they expect to beat year 8 sales and make up for their losses they need to invest a little more in research and development. This will help in securing new products and new customers.
Second Competition Bikes has accounts and notes payable at $229,003 for year 9. Although no one wants a lot of liabilities some are a good sign that business in doing well because there were suppliers to pay because more supplies were needed to build more products. For year 8 accounts and notes payable were $261,200 and for year 7 $195,900. The year 9 budget for this account is a little low because for every increase of about $100,000 in sales there is a significant decrease in accounts payable. The company only expects to make $164,000 more in sales for year 9 so the accounts and notes payable…...

Similar Documents

Jet 2

...properly measuring the rider and placing the order with the factory. Some distributors allow their bicycle shop retail outlet clients to do their own measurements but the distributor is contractually committed to the order once it is placed. The factory constructs the bike frame according to these measurements and adds the approved braking, gearing, and other miscellaneous components as specified in the order. Each bike is completely built at the factory. Quality control checks are conducted, and each new bike is test ridden to fully check all functional attributes of the product prior to shipment to the distribution network. MANUFACTURING COSTS CarbonLite Production Standards Direct materials: Each bike frame requires an average of 42 (2 as a production scrap allowance) carbon strips which cost $9/strip. The component package costs $275. Direct Labor: Each bike requires a total of 15 hours of direct labor. The average $20 labor costs are relatively high due to the high skill level required in manufacturing the product. Retention of the quality labor force has not been a problem. Variable Manufacturing Overhead: Variable manufacturing overhead is currently applied at $94.529/unit. PRODUCT SALES AND THE MARKET Sales Summary – last three years Company Sales in Units Model Sales Price Trade Current Last Discount to Year - 2008 Year - 2007 Distributors CarbonLite $2990 50% 3400 4000 Two Years Ago - 2006 3000 Sales Forecast: Global Economic Impact Competition Bikes,......

Words: 3636 - Pages: 15

Jet 2 Task 2

...than $50,000 in this area than the previous year. I would suggest that the budgeted amount be somewhere between the year 7 & 8 amounts, given the positive prediction that sales will increase, which would put it between $1273867 and $1322075. This over statement in this category has also led to the company to under budget their Operating Income which they have budgeted at $80585. With the prediction of selling more units than year 8, the company should be budgeting a higher Operating Income than the previous year’s amount of $97,533. They definitely should not be indicating that they will be selling more but making less. This would be a bad financial sign for the company, as it is showing a lack of leadership and management skills. 2. No budget can be perfect, so keeping this in mind; one would expect variances to be present within the flexible budget. The variances found within this flexible budget, however, seem to highlight the flaws that were noticed and explained above. The first variance that is displayed is the unfavorable variance of $130,065.00 in Net Sales. This is due to the fact that the company sold 3423 units, not the 3510 that was placed in the budget. The variance is considered unfavorable, as the company did not make as much in net sales as it had budgeted for. The positive side for the company is that it did, in fact, turn around the negative sales trend that existed between years 7 & 8. The next variance comes in Direct Materials. ......

Words: 1118 - Pages: 5

Jet 2 Task 2

...Research for marketing decisions. Englewood Cliffs, N.J: Prentice-Hall. Horngren, C. T., Foster, G., & Datar, S. M. (2006). Cost accounting: A managerial emphasis. Upper Saddle River, NJ: Pearson Prentice-Hall. Lester, A., & Lester, A. (2007). Project management, planning and control: Managing engineering, construction and manufacturing projects to PMI, APM and BSI standards. Amsterdam: Elsevier/Butterworth-Heinemann. Snow, C. C. & Hambrick, D. C. (1980), Measuring Organizational Strategies: Some Theoretical and Methodological Problems, Academy of Management Review, pp. 527-538. William, J. Bruns, Jr. & John, H. Waterhouse (1975), “Budgetary Control and Organization Structure “, Journal of Accounting Research, Vol. 13, issue 2, pp. 177-203....

Words: 1345 - Pages: 6

Financial Analysis: Jet 2 Task 4

...JET2 – Task 4 Financial Statement Analysis Managing Internal Cost & Controlling Finances Summary Report In response to a request from the Vice President of Competition Bikes for an analysis and recommendation regarding Activity Base Costing, as well as a request for a break-even analysis with projections of the company’s target profit, I have developed the following report. 1. Costing Method Evaluation Traditional Costing and Activity Based Costing (ABC) are the two systems we will evaluate in relation to Competition Bikes’ operations. To do so, we will need to look at the advantages and disadvantages of both systems. Costing systems are used to help predict the profitability of a product and help establish the cost of a product correlated to the income it generates. Traditional costing allocates overhead according to the amount of a particular cost driver, for example, how many direct labor hours are required to manufacture a product, while activity based costing looks at each activity and assigns a cost to it. Traditional costing separates costs into direct and indirect categories. The costs of labor or of raw materials would be examples of direct costs. Then, traditional costing divides the total cost of a product by the direct labor cost. This gives us the estimated cost of the product per item. However, increasingly in today’s business environment, the proportion of direct costs have fallen in relation to the......

Words: 3145 - Pages: 13

Jet 2

...Diverse Groups Dave Park Leadership is important in managing and organizing the structure of the organization while trying to maintain a profitable company that takes into consideration employees, shareholders, customers and board of directors, etc. Another attribute of a great leader is managing diversity in the workplace. However, diversity includes many different issues and needs to be managed and if done properly can lead to competitive advantages for the company. Thomas A. Kochan, professor at MIT, stated “Diversity can enhance business performance only if the proper training is provided and the organizational culture supports diversity (Dubrin, 2010). Managing Cultural Diversity: Managing cultural diversity is not an easy task, however, when incorporated into the organizations core values, is makes it easier to incorporate (Dubrin, 2010). Below is a diagram that provides a breakdown of areas or issues that may need to be looked at to evaluate the possibility of creating and leading a culturally diverse organization. These areas may help to identify areas where a competitive advantage may be available in the organization. In such a culturally diverse world and as the organization makes decisions that will impact them globally, these discussions are vital for the success of the company. Whether not decisions are made to implement or not to implement decisions based on diversity within the organization, these ideas, may identify some of the organizations......

Words: 1255 - Pages: 6

Jet 2 Task 1

...liabilities. A strength for the company. Retain Earnings: An increase in Retained Earnings was reported this year. The balance sheet shows an increase of 2.7% (or $31,286). An increase in Retained Earnings is expected since we also saw an increase in Cash Equivalents (a strength). This increase also reveals that no dividends have been paid out to stockholders for the year. This is to be expected during years of decline, but it should be an item of concern since no dividends were paid during years 6 and 7 as well. Total Assets: Total Assets declined slightly from $4,293,044 to $4,285,831 (.2% decline). Depreciation was only increased by 50% this year compared to 100% last year (a strength). This shows that us that the double-decline balancing method is used by this company. This 50% reduction along with with the slight increase in capital expenditures is the reason for the .2% decline in Total Assets. Management show put focus on how to reduce Capital Expenditures since this is an item that they can control. Summary Even though this was not a prosperous year for Competition Bike’s, they do show signs of prosperity. The continued decline of Long-Term Liabilities is proof of that. Management should pay special attention in managing Cash Equivalents and Capital Expenditures to show stockholders that Competition Bike’s knows how to manage money and reduce costs. By taking care of the two items mention above, Competition Bikes Income and Balance Sheet so......

Words: 8250 - Pages: 33

Jet Task 1

...Financial Analysis (COURSE CODE: JET Task 1) A1 a. Horizontal Analysis Results Income Statement Based on the review of Competition’s Bike’s Horizontal Analysis, revenue shows a decline of $897,000 or 15% in Year 8 compared to Year 7. The decline was mainly due to the current economic conditions. This also resulted in the decline in gross profits by $266,600 or 16.3%. The selling expenses of the company fell by 14.9%, compared to a 16.3% decline in the gross profits from year 8 to Year 7. Most of their customers are expert riders, who are supported. Several of the supporters have reduced on the financial support to the cyclists. The cost of goods sold for Competition Bikes, Inc. declined 14.5% in Year 8, a 31.8% drop contrast to Year 7. Even though it does draw a parallel to earnings the decrease was not significant. Selling costs such as advertising, website creation and sales commissions, distribution network support, maintenance, and transportation showed declined by 14.9 %, a slump from 33% in Year 7. This decrease in the cost between goods sold and the selling expenses are full force for the company. The General and Admin expenses such as administrative supplies, executive compensation, employment taxes, utilities, payroll services, research and development, depreciation expense and more showed a slight increase of 1.2% in Year 8. The increase in general administrative expenses is due to a 11.1 % increase in utilities, a 7.6% a raise in other general......

Words: 4547 - Pages: 19

Jet 2 Task 2

...Rachel Johnson Addy JET Task 2 March 29, 2014 JET Task 2 1. A budget is an itemized estimate of expected income as well as estimated expenses over a specified period of time. The reason to design a budget is to regulate spending. There are multiple causes of concern with Competition Bikes budget plan. The main cause for concern is that the sales estimated for year 9 is 3,510 units. This estimate is not supported by past sales data. Due to the current economic status, the amount of units sold from year 7 to 8 decreased 15% according to the horizontal analysis. Rider sponsorships were also reduced and will most likely remain limited in the future (WGU, 2014). There is some misleading and inaccurate information posted within the budget. Under the Selling, General, and Administrative breakdown “utilities” is listed at $150,000 on the vertical analysis for year 8 and year 9. Then there is another listing for “utilities and services” of $54,000. This is misleading because this entry was not listed in the expenses from the previous year. Another cause of concern is that the cash budget is not included in the uncollected receivables. CB makes expensive bikes so there should be room for uncollectable accounts. The uncollectable receivables budget could be used to cover the any uncollected payments. The reduction of sponsorships and the slow economy could possibly cause a rise in uncollectable accounts. There is also some concern because the operating income is......

Words: 1749 - Pages: 7

Jet 2 Task 1

...working capital can be tricky, because you want to have balance not too much or too little a healthy ratio would be 1.2 to 2.0. A weak working capital would be less than 1 would be considers a negative and more than 2 is improper investment of assets. Competition Bikes working capital is $1,275,631 or a 5.24 ratio yr. 8, $1,119,344 or a 5.78 ratio yr. 7, and 924,223 or 9.79 ratio yr. 6. As a result they have an excess working capital. They have managed to decrease the capital from a 9.79 ratio to a 5.24 ratio over that 3 year period. Competition Bikes is moving in the right direction but still has many changes that should be made to have a healthy working capital. Working capital can be improved by utilizing Just in Time (JIT) production. JIT is where a company on produces inventory that is need to avoid holding inventory. Inventory cost including raw material and finished good inventory can be controlled with JIT. Managing production could be helped with the use of inventory management software. Improving the accounts receivable collection times would improve the working capital. They are currently making collections in 43.8 day. They should make changes to the collections policy to when it allows them to make collects in 30 days. They could bill the client 2 times a month 15 days apart and payment would be due 15 days after the invoice date. Billing in this manner will allow Competition Bikes to received payment in 30 days or less. Competition Bikes has excessive......

Words: 4327 - Pages: 18

Jet 2 Task 1

...Financial Analysis Summary Report Task 1 Competition Bikes Incorporated Lisa A Castro, MSW Western Governors University Horizontal Analysis (A. 1. a) A horizontal analysis can be defined as “the study of percentage changes in comparative statements” (Charles T. Horngren, 2008, p. 746). It is useful in determining a company’s financial stability. This section will analyze Competition Bikes Incorporated’s (CBI) percentage changes from years 6 to 7 and then 7 to 8. The report will include an analysis of CBI’s comparative income statement and balance sheet. Between years 6 and 7 CBI’s Net Sales increased by 33.3% for a change of $1,495,000. The increase of 33% indicates strength for the company because it means that the company has become more profitable. This also indicates that demand for CBI’s product has increased and that their marketing strategies have been more successful. It is good news for the shareholders because more profits means more revenue. Between years 6 and 7 CBI’s Cost of Goods Sold increased by 31.8% for a change of $1,048,000. Even though the Cost of Good Sold increased significantly it is still less than the Net Sales increase of 33.3%. This resulted in a Gross Profit of 37.5% or $447,000. This indicates strength for CBI, as the management was able to control their costs to turn a profit on the increased sales. This is also a positive for the shareholders because increased profits mean more revenue for the shareholders.......

Words: 6540 - Pages: 27

Jet Task 1

...also be shown. In a balance sheet, for example, cash and other assets are shown as a percentage of the total assets and, in an income statement, each expense is shown as a percentage of the sales revenue. Financial statements using this technique are called common size financial statements. (businessdictionary.com, 2014) In order to assist the company in determining the possibilities over the next few years, included in this report will be a trend analysis which is a method of time series data (information in sequence over time) analysis involving comparison of the same item (such as monthly sales revenue figures) over a significantly long period to (1) detect general pattern of a relationship between associated factors or variables, and (2) project the future direction of this pattern (businessdictionary.com, 2014). The final form of financial analysis to be covered is ratio analysis, which, is the single most important technique of financial analysis in which quantities are converted into ratios for meaningful comparisons, with past ratios and ratios of other firms in the same or different industries. Ratio analysis determines trends and exposes strengths or weaknesses of a firm (businessdictionary.com, 2014). Horizontal Analysis Results Based on the information provided in the Comparative Income Statement for year six, seven, and eight the horizontal analysis shows a substantial gross profit increase of 37.5% or $447,000 in year 7 and then declining 22.4% ($266,600)......

Words: 5976 - Pages: 24

Wgu Jet Task 5

...JET TASK 4 A1: Costing Method Report to the Vice President recommending whether the company should change its cost method - to activity based costing. Activity based costing is a method used in identifying activities companies perform thereby assigning indirect costs to products. Activity based costing (ABC) system recognizes the relationship between costs, activities and products, assigning indirect costs to products. (Investopedia, 2014) Competition Bikes, Inc. report to the Vice President follows on cost method change from traditional costing to activity based costing. Traditional cost entails one rate, activity based costing involves multiple steps. In activity based costing each activity and estimate of cost total and indirect must be computed. The cost driver for all activities will be estimated with the total quantity of each driver’s allocation base. When the driver’s allocation base is established the cost of each activity is determined. Then the cost to cost objectives are established. Activity based costing focuses on the company’s activities. Utilizing the measures the cost of the products and services are then determined. Activity based cost allows for a more accurate forecasting of the future cost of the product and service. Product cost will be more time consuming utilizing activity based costing, but it provides more accuracy of actual cost. Activity based costing will assist in making the profit margin increase in making better decisions for...

Words: 1143 - Pages: 5

Financial Analysis Jet Task 2

...Requirements for Task 1: A Prepare a summary report in which you do the following: 1) Evaluate the company’s operational strengths and weaknesses based on the following: a) Review the horizontal analysis, analyze the results, and discuss operational areas of concern. “Horizontal analysis of financial statements involves comparison of a financial ratio, a benchmark, or a line item over a number of accounting periods. This method of analysis is also known as trend analysis. Horizontal analysis allows the assessment of relative changes in different items over time. It also indicates the behavior of revenues, expenses, and other line items of financial statements over the course of time.” (Ready Ratios, 2014a) The sections below summarize the results of my horizontal analysis of Competition Bikes, Inc. (CB): Year 7 to Year 8 CB suffered a decrease in Net Sales Revenue of 15% from Year 7 to Year 8, but the course materials explained this as a result of a decline in the overall economy. This is a reasonable explanation and may very well indicate that CB management’s actions or inactions are not to blame for decline. It is encouraging that percentage decreases in Cost of Goods Sold and Selling Expenses, 14.5% and 14.9%, respectively, approximated the 15% decrease in Net Sales indicating no significant change in marginal cost of production and sales. That total General and Administrative Expenses increased by 1.2% is not any cause......

Words: 10434 - Pages: 42

Jet Task 1

...robust, and also stronger than Two Wheel Racing. Secondly, Earning per Share for year 7, equating to 0.17. This is also a strong year for Competition Bikes Inc., in turn benefiting the company employees as a whole. Also a stronger profit margin compared to Two Wheel Racing. In regards to weakness, unfortunately the Ratio Analysis identifies this as well. Year 8 saw a major decline in the Earnings per Share, 0.03. Compared to Two Wheel Racing, also not a successful resulting in a weakness for Competition Bikes Inc. Secondly, the Return on Total Assets for year 8 declined significantly, showing at .7%. Two Wheel Racing were a much stronger 4.8%, which is not good for business moving forward and must be a concern for Competition Bikes Inc. A.2 Analyze the working capital of Competition Bikes Inc. Consider the following in your analysis: • Ways to improve the working capital • Ways to use excess working capital to generate an increase in profits Working capital is the amount of current assets minus current liabilities. In the case of Competition Bikes Inc., the working capital, according to the Balance Sheet for year 8, is $1,275,631. This is a substantial amount of capital, showing improvements from years past. Firstly, the goal of Competition Bikes Inc. is to lower their liabilities and increase their income. Improving collections and determined to lower the inventory amounts will also benefit the bike company in their endeavor to improve the working capital. They will......

Words: 3522 - Pages: 15

Jet Task 3

...Financial Analysis Task 3 A1. Competition Bikes is considering expansion into Canada. Before this consideration can be made it is essential to review the capital structure and ensure operations maybe fully funded. Based on past financial standing Competition Bikes has long term debt that may cause concern. Below is a Chart displaying potential earning per common stack share based on Earnings before interest and tax figures from the Canadian Budgeted earnings for Year 9-13. Looking here you can see the optimal Capital Structure for the moderate Canadian budgeted earnings. The goal is to determine which source of alternative for capital sources will fit Competition Bikes Best. Earnings per common stock share refers to the profitability of a company by placing a value on their stock (Investopedia 2013). When reviewing the information above it is recommended that Competition Bikes Inc. issues a 50% preferred stock with a 5% dividend interest and $50 par and a 50% Common stock | 12% Bond | 50% Preferred (5%,$50par) and 50% Common Stock | 20% 12% Bonds and Common Stock | 40% 12% Bonds and Common Stocks | 60% 12% Bonds and Common Stock | | Earnings Per Common Stock Share | 0.002 | 0.027 | 0.0027 | 0.023 | 0.017 | Year 9 | | 0.009 | 0.032 | 0.032 | 0.028 | 0.023 | Year 10 | . | 0.019 | 0.039 | 0.038 | 0.035 | 0.031 | Year 11 | | 0.031 | 0.048 | 0.046 | 0.043 | 0.04 | year 12 | | 0.042 | 0.057 | 0.054 | 0.052 | 0.049 | Year 13 | | 0.103 | 0.203 |......

Words: 2555 - Pages: 11