Baldwin Bicycle Company: Management Accounting

1445 Words Feb 16th, 2011 6 Pages
De La Salle University
Coll College of Business and Economics Ramon V. Del Rosario Sr. Graduate School of Business

Case Paper
On
Baldwin Bicycle Company

Submitted in partial fulfillment
For the requirements in
Management Accounting (ACC510M)
AY 2010-2011, 3rd Trimester

Submitted to:

Professor Jolly B. Cruz

Submitted by:

Presenting Group 5

Kelvin L. Go
Elmer V. Dela Cruz
Joshua G. Soriano
Jeffrey T. Tabangcura
Kristian Jewel P. Taiño
Grace Taguinod

26 February 2011
CASE BACKGROUND

Baldwin Bicycle Company (BBC) is a mid-range full-line bicycle manufacturing company with 40 years’ experience. BBC produced 98,791 units accounting for over $10MM in revenues in 1982, with an expected 100,000 units for the
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▪ Variable Costs are Linear o This decision model assumes that variable costs, such as materials and labor, are linear over the relevant range; that is, there are no volume discounts on material, and that addition of more labor does not incur further costs. ▪ Workers are Efficient o Although BBC is operating at approximately 75% of capacity, this assumes that workers are not idle; rather, workers are individually working at full efficiency, but only enough workers to produce the quantity required are scheduled. ▪ Hi-Valu’s Estimates are Accurate o Knott estimated that 25,000 units per year would be sold; further, he speculated that a unit would sit in the warehouse, on average, two months, although Hi-Valu would purchase units in the warehouse for four months automatically. BBC’s current inventory turnover ratio is 2.92, or approximately 4 months. Although Hi-Valu is a discount chain and would likely have a higher inventory turnover than BBC, which sells only through sporting goods and specialized bicycle stores, Knott himself stated that Hi-Valu did