JET2 Task 2 Report

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.

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

JET2 TASK 2 10 Lastly the CB budget as a whole is somewhat of a concern because it has so many miscellaneous expenses that are not detailed and referred to as "Other" be it Asset or Liability and Also because it is a Annual Budget considering CB is a company whose product is a seasonal one ( competitive bicycle racing is a Spring and Summer sport) CB should use a quarterly budget or have a quarterly budget broke down as part of their annual budget. Not to mention that within the storyline a monthly budget is referenced being used for the purchasing department in order to purchase raw materials. The overall

A variance report is a report where it demonstrates and compares the cost for our hospital. This reports shows what the budget was estimated for, the actual amount spent, and the variance. The variance means what we profited in or lost. I work in one the few bigger hospitals as a finance manager. There was recently a tornado that killed eight people, destroyed over a couple dozen homes, and injured about hundred people. Obviously, this was an unexpected event that had impacted my budget. Many of these patients did not have medical insurance, therefore, we were not receiving as much profit as we were losing. Even though my Vice President was aware of

The current operations can also be improved by implementing a just-in-time inventory management system. This is where the company only buys the materials that it needs to produce the units that are actually sold. This cuts down on dollars that are tied-up in inventory held in raw materials inventory. This is a considerable amount for Competition Bikes, Inc. and will be lowered enormously as fewer materials are placed in raw materials. This will be billed in the same month in which they are produced creating fewer dollars to be tied up in inventory. This will then be converted to cash to be used as working capital.

The second task that needed to be finished was to forecast the income statement and the balance sheet for the next two years. We grew sales at a 15% rate, which is the stated rate from Koh. Also, in forecasting the balance sheet, we only showed debt financing for the capital expenditure of the DVD manufacturing equipment, which was the requested structure. Other relevant facts and assumptions for preparing the financial forecast are stated below-

After preparing the operating budget and variance analysis for Peyton Approved, for the quarter, which spans from July to September 2014. With that information, this paper is to discuss the operating budgets and variance analysis for the company Peyton Approved. This is essential for a business to predict the company cost will incur in future financial periods. An operating budget by definition, consist of short-term financial plans used to coordinate goals that achieve the short-term goals for the company to be successful (Miller-nobles, Mattison, Matsumura, & Ella Mae, 2013, p. 1142).

With the two pricing equaling each other, that means there is a zero change. For direct materials efficiency variance, the standard quantity was 30,000 units and the actual quantity was 31,000 units. There is an unfavorable direct materials efficiency variance of 7,750 due to the 232,500 of budgeted materials among 240,250 of actual materials used. For direct labor variance, there was an initial $16/hour and an actual cost of $15/hour. The difference of one dollar per hour here ended Peyton Approved with a $33,000 favorable labor variance. Finally, for Peyton Approved’s direct labor efficiency variance the standard quantity of labor hours was 30,000, while the actual quantity in labor hours were 33,000. Peyton Approved’s standard cost of $16/hour and the actual quantity of 30,000 labor hours results in $528,000, which means that there is an unfavorable labor efficiency variance of 48,000 caused by a rise in labor hours within the company. These labor and materials variances can help Peyton Approved find any issues that need to be corrected and budget more

This was our first and only bike at the time we took over the company in 2003. This bike was our introduction to the market where we learned how competitive it can be. There were many people in this market and sales were declining. Our goals were to shift the company to a different area of sales and this bike did not really fit into our plans. We did not advertise very heavily for this bike after the first year and sales started to decline. The first year we tried to push the bike but sales were stagnant. This is when we started to work on our product development for our push into different markets. In 2005 we launched two new bikes and saw a major decline in sales for our adventure bike. We kept the adventure bike on our product line as a safety just in case our new bike ventures didn’t work as expected, but in 2006 we ended production of the adventure bike. We just felt there was not a great potential for growth in this market and decided to pursue new markets.

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.

Sales price for the mountain bike went up by a very insignificant amount of $1 and forecasted sales were reduced to $18,918 due to the release of the youth bike, which would be KHMJ’s main focus. The youth bikes price was set at $425, $50 higher than the recommended price; along with forecasted sales of 58,099 units. The reasoning behind the huge volume is based on the market size of the youth market in addition to hopes competitors would rather enter road bikes and/or upgrade mountain bikes. Branding was cut down by $500,000 to $200,000 due to a high need of funds to be allocated towards the youth bikes expenses, all extra support was also removed in order to make ends meet. There was a 1 percent decrease in margins for discount stores, otherwise retail margins were untouched. The new youth bike was introduced to increase options and reach new potential markets in order to increase income and shareholder

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

Analyzing the results of 2016, it is clear the company has improved. To begin, the new strategy of raising the price and producing less bikes increase the sales revenue by $1,547,083. As well, the COGS was reduced by $281,858. The amount of cash was increased by $1,341,627 and retained earnings increased by $1,177,033, which is useful for the future as it could be reinvested or used to pay off long term debt. The awareness rating went up by 0.12 and the PR rating increased by 0.2 as a significant amount of money was put into advertising and PR. Selling and distribution expenses increased by $2,139,271, however net income only decreased by $196,705 likely due to the increase in price. The net income fell short of the profit forecast by $354,405. As for the distribution rating, it was 0.21 below the recommendation, though as it is only the second year, improvement can definitely be anticipated in the future.

As a project manager I will often get calls from my vice president to do variance reports. Variance Reports is way that executives will watch their company’s performance by comparing one set of numbers to another. The two set of numbers they will be looking at are the set amount they want to spend and the actual amount that is being spent. These reports are used to analyze how close they’ve come to hitting forecasted sales targets. Also if we are meeting budgetary goals; when sitting at my desk writing this report there are three main topics I must address and they are trends, overspending and underspending(What are the factors to consider in creating a Variance Report in Management Reporter? 2016).

of activity. Any deviation from the estimated budget is termed as the variance of the flexible budget that can be either favorable or unfavorable (Kaplan & Atkinson, 2015). Here is the