Mikes Bike Rollover 5

Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.

Variable Costs. Overall the company had favorable variances in variable costs, excluding the efficiency variance. As expected, since Competition Bikes sold less than predicted, their related costs: direct materials, direct labor, manufacturing overhead and variable expenses were less than budgeted amounts showing a favorable variance. The labor and overhead revenue and spending variances however, showed unfavorable due to actual output despite the changes to the flexible budget. With the prediction of decreases costs based on sales, these costs should have also decreased. There is no further information on why these rates were high, Competition Bikes will need to look into those expenses.

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

As our strategy of ‘high price-low volume’ suggests, we wanted to sell our bikes at a higher price than was recommended by the market. In the first rollover however, we decided to increase the price of our bike from the recommended $550 to $579. We were being careful about the chances that other firms would not increase their price of the bike as much as we would, and thus capture more of the market by doing so. We felt that we needed to produce a bit more than the current capacity suggested, from 20,000 to 22,000 bikes. The cost of goods sold would decrease if we produced many bikes this rollover, so the decision to produce more bikes on average only for this rollover was upheld.

share increased an average of 27% per year. This remarkable increase in earnings did not go

Instructions: Complete a five year simulation, and answer the following questions on the actual approach you used for the simulation. You may type your answers directly on this form, but the completed document must be 2-3 pages in length (please do not change the margins). Due November 25, 11:59pm

During a MikesBikes wrap-up session, students offered these “lessons learned” to future players. The number of “votes” recorded for each suggestion is used to rank order of the items.

The company started off producing 20,000 units of mountain bikes. We did not change the production quantity. Last year our forecast sales were 24,000 when we only sold 19,866; therefore we thought it would be best to leave production at 20,000 bikes. Having excess inventory, we concluded that 20,000 units should be enough considering our quality has not changed and our advertising will not increase the sales dramatically. Although we had the choice to produce as much as 30,000 units, we felt as though we did not have sufficient money to increase production. We were interested in allocating the money towards marketing as opposed to production. We realized that without awareness, no matter how many units we make, sales would be inefficient.

our business. As the president and the CEO of Bikes Bikes Bikes, I am proud to present to you the

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

The cumulative net profit increase of about 50% (Sheet 1, cell L18) shows that Richardson’s net profit on

Meanwhile, the sales revenue decreased 6.1%. However, Dirt Bikes' cost increased too quickly to almost 10%. (See Figure 1.5 and 1.6)

Increase in the profits above the actual budget can be attributed to 20% increase in sales in 2009. Although Jean’s profits were above the actual budget, French Division’s earnings were much lower than what it could have been, had they budgeted for the actual volume of sales that they ended up selling. We can partly attribute this decrease in earnings to the fact

During this time, sales increased from: $7.11 billion in 2010 to $7.99 billion in 2012. Earnings improved from $2.84 to $3.57. While the total amount of dividends rose from $1.00 to $1.72. These figures are showing how the company has been continually increasing sales, earnings and dividends over the last three years. In the future, the management predicts that their current strategy will increase returns. As, executives believe that their focus on building the brand and accounting for costs will lead to net earnings of $5.20 to $7.19 annually by

When it comes to sales representatives they wouldn’t want to sell the XS250 bike because they were only getting $150 over a bike that they can get $900 for. I really think the production problem is what’s important to get fixed right away. Along with that sales representatives should get extra bonuses for selling the XS250 bike. I believe after these changes are made their sales would go up much higher.