The Expectations With The Forecast Budget For Year 9

1669 WordsNov 14, 20147 Pages
A1. Concerns There are several concerns with the forecast budget for year 9. This first concern is in Advertising. Competition Bikes has annually budgeted 2% of gross profit. Due to the weakening economy and -15% reductions in year 8, the concern is not making the forecasted amount of units without increased advertising. Competition Bikes should consider increasing its cost of advertising to help with communication about the company and its product lines to drive higher sales to meet the 3510 units. The second concern is Utilities. In year 7, utilities were running $130,000 or 8.24% of gross profit. During year 7, Competition Bikes sold 4000 units. The concern with Utilities is that it isn’t decreasing to a level comparable to when Competition Bikes had its highest year of production. The third concern is with Research and Development (R&D. Research and Development is designed to allocate funds toward research for the purpose of discovering or creating new products. Year over year, Competition Bikes has only allocated 6% of gross profit toward the research and development of new product lines. To help with the previous years’ -15% in net sales, Competition Bikes should begin more R&D activities to help boost sales to meet the projected number. Another concern is the costs associated with “Other General and Admin Expenses.” The allocation of $170,000 didn’t increase from the previous year; however when Competition Bikes sold their highest volume in year 7, Other G&A expenses

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