Financial Analysis Task 2
A1. Concerns
There are a couple of concerns with Competition Bikes Inc., ProForma for year 9. The first concern is the amount of money that is allocated to research and development. For the previous three years, they have been all over the board with their budgets. The sixth year was $71,460, the seventh year was $98,280, and the eight year was $82,284. This is concerning that the budget has fluctuated so much. In the ninth year they have allocated $85,861. This budget line item should be analyzed so there is not so much variance in the budget between year to year.
Another concern is the amount of carbon fiber sheets that are going to be purchased. It takes 42 sheets to produce 1 bike. Times this by the
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This has over $88,000 favorable to the budget. The line item for advertising expenses is showing unfavorable by $3,049. This could be because the company expects that the sales were declining, and they weren't going to hit the goal of 3510 units. The advertising and marketing department could expanded their advertising to entice more buyers. The line item for transportation out shows unfavorable by $2,997. This could mean that poor budgeting was used in this instance. They had originally planned $105,300 for shipping costs for 3510 units. In reality they spent $2,997 more for only 3423 units. This line item would need to revised for current shipping costs. The manufacturing overheard line item is favorable by $8,224. This is to be expected because less product is being created. The line item for research and development is favorable by $3,020. This could be due to lack of sales, the research and development department had to be cut a little. Mostly all other line items are fairly close to their allotted budget. The direct labor rate is favorable by $26,100. This is favorable because less product is being made than anticipated, so less charging to direct labor is the result. The minor variances could be due to the fact of utility rates changing, executive churn, and tax rates that fluctuate.
A2a. Corrective Actions
A budget is essential for a company to succeed. Without these budgets, it is very hard to be able to see where all
Because Competition Bikes was able to save money on Gasoline and maintenance costs for vehicles, yet they were unsuccessful at using their vehicles making this a weakness.
A1. Budget Concerns Competition Bikes budget has several areas of concern that need to be address. 1. Units expected to be sold for year nine is 3510. Competition Bikes is predicting that they will sell 3510 Bikes but they only sold 3400 Bikes in year eight down 15% from year seven 4000 units sold. Competitions Bikes has budget to high because the current economic down turn is showing no signs of relief for the next three years. Many of Competition Bikes customers are sponsored riders and many sponsors have pulled their funding to their rides. Competition Bikes has not presents a plan that would support their projections. Competition Bikes should lower there should lower the expected units sold so not to over order raw materials that will
There are many concerns with the budget planning for Competition Bike. From year 2006 to 2008, Competition Bike experienced a 13.3% increase in sales. In year 9, sales are projected to increase to 3510 units to give sales revenue of $5,247,450. This is a bold increase after 3400 units sold in 2008 and 4000 sold in 2007. I do not think the sales will be as robust with the economy rebounding. Sales projections should be 3425 with net sales at $5,120,375.
JET2 TASK 2 10 Lastly the CB budget as a whole is somewhat of a concern because it has so many miscellaneous expenses that are not detailed and referred to as "Other" be it Asset or Liability and Also because it is a Annual Budget considering CB is a company whose product is a seasonal one ( competitive bicycle racing is a Spring and Summer sport) CB should use a quarterly budget or have a quarterly budget broke down as part of their annual budget. Not to mention that within the storyline a monthly budget is referenced being used for the purchasing department in order to purchase raw materials. The overall
This research paper is a brief discussion of budget management analysis. Budgeting is the key to financial management, and is the key to translates an organization goals or plan into money. Budgeting is a rough estimate of how much a company will need to get their work done, and provides the basis for evaluating performance, a source of motivation, coordinating business activities, a tool for management communication and instructions to employees. Without a budget an organization would be like a driver, driving blinded without instructions or any sense of direction, that’s how important a budget is to every organization and individual likewise (Clark, 2005).
Commutronics had not accumulated enough profits and had no sufficient capital reserves. The company’s registered capital was therefore very low. The withholding tax rate of
Directions: Answer the following problems IN DETAIL. Your analysis must be typed and should be free of grammatical errors and “slang” terms.” Wherever appropriate, make sure you supplement your discussion with graphical analysis and equations. The graphs may be hand drawn, but please make sure they are neat. There are no restrictions or requirements on working in groups. The one exception is that each person must hand in his/her OWN work. In economic terms, there are no input restrictions; however, the output MUST be yours.
A company's budget serves as a guideline in planning and committing costs in order to meet tactical and strategic goals. Tactical goals such as providing budgetary costs for daily operations, and strategic objectives that include R&D, production, marketing, and distribution are all part of the budgeting process. Serving as a guideline rather than being set in stone, the budget is a snapshot of manager's "best thinking at the time it is prepared." (Marshall, 2003, p.496) The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred.
To determine the causes of the variances, price variances and quantity variances can be calculated separately for each aspect of bicycle construction. Price variance and quantity variance are the two parts that make up the total variance between the flexible budget and the actual budget, which we found to be $259,187. To find price variance, the actual quantity of each part used must be held constant while price per part varies. This will show how the total cost is impacted by the difference in part price. Therefore this
activity in its flexible budgets. During July, the company budgeted for 7,900 units, but its actual level of activity
What is the financial impact of this situation on the organization? Develop a short plan for how you would compensate for this situation.
After closely reviewing the financial and production data, our accounting team has found that your traditional cost allocation is faulty and misleading. The costs of products A and C were over allocated and products B and D were under allocated causing deceptive information on the true profits of the company. Also, product B appears to be
(Compound value solving for I) at what annual rate would the following have to be investe
Budget is time-consuming, especially if it involves a poorly managed company. The budget only pays attention to the quantitative aspect of business while neglecting the qualitative aspects. It does not consider the quality of services or goods and therefore inconsiderate of customers’ satisfaction. Another disadvantage of a budget is that it is inaccurate. A firm rarely “makes budget.” The hope is that the business activity will be close to the budget, but it could be off considerably and lead to bad hiring, spending and production decisions. This is because budget preparation is based on assumptions and thereby changes in the business environment could lead to unachievable
Based on the arguments above, in spite of budget’s importance in organization, its become a matter of great concern either change or remove budget from modern organization. Due to several limitations outlined above, it can be seen