Mikes Bike Rollover 5

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.

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

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.

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.

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.

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

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

Advertising and transportation forecasted costs should have also decreased but instead, increased. Although an increase in advertising was recommended, the additional costs were not accounted for in the flexible budget. Transportation out is covered by a per unit contract so the decrease in sales should have reflected a decrease in transportation out costs. Both of these costs should have decreased with the decrease in sales like direct materials did. These negative variances indicate the company cannot control costs. This could be caused by a number things: fraud, miscommunication, poor forecasting, unexpected economic changes, etc. Competition Bikes needs

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

It seems that the company late in the year could have adjusted their approach to spend more in advertising in order to make up for the lag in net sales, this reaction to a decrease in sales is likely and could have helped get the company up to 3400 units sold for the year if they noticed a decrease in anticipated sales earlier in the year. Competition Bikes should have increased their budget for total advertising expenses in year nine to appeal more to the individual buys rather than the corporate sponsors in order to meet their sales goals. Transportation out was over budget by 2%, as with advertising expenses, anything over budget results in a loss of gross revenue for Competition Bikes. With a 3% decrease in total sales, there should have also been a 3% decrease in transportation out expenses as transportation out is a fixed delivery expense. Reasons for this unfavorable expense could be that Competition Bikes offered expedited delivery on certain order to promote sales or there may have been an increase in cost enforced by the company's freight provider for delivery services.

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

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.

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