Baldwin Bicycle Company Case Study

New Contribution Margin = New Price per unit – Variable cost per unit =$8.5-$2.5 =$6

1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.

Starting from a company of less than 75 workers and owning less than 20,000 SCU for production, research, quality assurance and conduct warranty work Off The Chain Bikes has doubled the plant capacity and hearing doubling the workforce within two short years. The company is successful by targeting and capturing lucrative market shares by heavily investing in the desired technical specs and design styles of one of the most influential Racing bikes. Our keen ability to thoroughly research market demands, predicting competitive strategies between the four market majority shareholders by reviewing and interpreting the marketing reports and our aggressive design and development plans have significantly increased our market share and increase shareholder value. Our core competencies and strategic goals will be realized by carefully following our established plans and aggressively price our bikes to increase total market share.

14. If 11,000 units are produced, what are the total amounts of direct and indirect manufacturing costs incurred to support this level of production?

Currently H-D is the leading seller of heavy weight motorcycles across the entire world. Because they are at the pinnacle they are the target for the competition. Some of Harley Davidson 's advantages are name recognition, brand loyalty, brand quality and customer loyalty (Hitt, Ireland & Hoskisson, 2013, p. 81). The company benefits by having “the made in America” image attached to its products. The image of a Harley rider and owner is one of a tough, independent, free spirit, ready and willing to take on the world type of man. The sound of a H-D motorcycle in idle or being ridden is unique and very identifiable.

Answer: H-D using “Differentiation Strategy” by offering its heavyweight motorcycle through the distinctive designs. H-D are also a leader in the heavyweight motorcycle manufacturers industry and it has more than 100 years old in this market, also its American icon make H-D become traditional brand. Due to H-D becoming the traditional brand in American made version, the consumers perceive that H-D mean quality. Consumers will choosing H-D products because of their high quality products and demand

4. For the most recent year, what is the amount of cost of goods sold in the

Consider a product line with 50% gross margins (after subtracting volume-related expenses from prices). The cost for handling an individual customer order is SEK 750, and the extra cost to handle a production order for a non-stocked item is SEK 2,250.

Question 3: Identify all costs associated with this venture. Categorize these costs as fixed or variable.

If Marlene Herbert were to discontinue place mats, he would miss $270,000 that will go toward Mendel paper company fixed cost. The company currently has a plant overhead that is estimated at $420,000 for the quarter. In addition to the fixed plant overhead, the plant incurs fixed selling and administrative expenses per quarter of $118,000. This draws the company to a total fixed cost of $538,000. If Marlene Herbert were to discontinue the second highest contributor to the fixed cost, he would need to increase the volume of computer paper and lower material cost to help pull the contribution margin of the lowest product up to help support the lost of a whole product line.

3. For each of the individual overhead accounts at Bridgeton, do you believe the given cost is variable, fixed, or something else? Why? (Use information or evidence from the case to support your evaluation, if possible. For most of these costs, there is no single right answer from the case information, so the goal is to come up with a reasonable estimate.)

Overhead costs include rent, office staff, depreciation, and other. Once the flexible budget was complete, variances between the actual and flexible budget could be calculated (Exhibit B). The variance for frame assembly was favorable with actual costs being $82,663 less than in the flexible budget. The variances for wheel and final assembly however were both unfavorable. Wheel assembly had an unfavorable variance of $50,650, while final assembly variance was the highest at an unfavorable variance of $231,200. Taking into account these three aspects of direct cost, direct cost has an unfavorable variance $199,187. Although most overhead costs are fixed, 2/3 of other costs are variable and increase with the increased production. As shown in Exhibit B, overhead variance is unfavorable at $60,000. The direct cost variance and overhead variable together lead to a total unfavorable variance of $259,187.

Baldwin had been a bicycle manufacturer for almost 40 years. The article illustrated that Baldwin Bicycle had the image of being above average in quality in price, meaning to say that it was not low cost competitor. Besides, Baldwin had never before distributed its products through department store chains of K-Mart, which is well-known for its low price.

Historically Harley-Davidson to be a Niche Marketer, which is they had focused in on one particular aspect of the market. Kotler and Keller identified the following characteristics of niche marketing; customers have a distinct set of needs, they are willing to pay more to the firm that best suits their needs, it is not likely to attract competitors, gains economies through specialized products and it has a size, profit and to grow. Almost all of these hold true for the “heavyweight” segment of motor cycles that Harley-Davidson produced.

3. Assume that cost of goods sold for a company consists only of variable costs and gross margin is = (revenue – cost of goods sold)/revenue. Which of the following is true