Jet2 Task 2 Essay

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Competition Bikes Budgeting and Variance Analysis Report
Western Governor’s University

Competition Bikes Budgeting and Variance Analysis Report Competition Bikes, Incorporated (Inc.) makes bicycles for professional and other highly accomplished riders who compete in bike races, biathlons, and triathlons. Approximately sixty percent of all race winners have been victorious using bicycles designed by Competitions Bikes, Inc. This extraordinary success rate is a topic of conversation among racers and has led to exponential success for founder Larry Ferguson who formed the company in 2001 in his garage. Competition Bikes is known for quality products and is leader in the market with the CarbonLite
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Even the slightest inaccuracy of sales forecasting and potential revenue amounts can skew other pertinent schedules which inevitably compromises the master budget plans.
Budget Planning Concerns Continued Another concern identified, is the utilities expense budget for utilities in Year 9 which is $150,000. This amount is identified as a fixed amount and is unrelated to actually production activities and manufacturing efficiency. Considering that production levels and activity fluctuates throughout the year, the budget for utilities should be a variable item. An example; from Year 7 to Year 8, the utilities expenses increase by $15,000 and with this detection, ways to reduce this expense should be investigate. Another concern is a duplicated line item under the Selling, General, and Administrative Budget for Utilities and Utilities and Services. Another issue for concern, Total Variable Cost was reported to be lower; however was not enough for the lack of sales combined with an increase in advertising and transportation which resulted in an overall negative result. The low Net Sales directly impacted the Contribution Margin which decreased by $49,397. Overall, these concerns indicate the need for a flexible budget with variance analysis.
Flexible Budget A flexible budget can be used to forecast a range of production possibilities, or it can be used to assess how well the company met the budget plan based
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