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WGU JET Task 2 Essay

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1. With the release of the new budget for year 9 from Competition Bikes, there are a couple of areas that are a concern that warrant being addressed. The first being the prediction of amount of bikes to be sold; Competition Bikes is expecting 3,510 units to be sold after a year 8 that sold only 3,400 units which was a 15% drop in sales from the year prior (which sold approximately 4,000 units) with zero drop in price point which may make it harder for customers to justify purchasing a bike in the current economy. Understandably, year 8 was in the middle of a recession and the economy could rebound for a productive year 9. However, with only an extra $984 being spent on advertisement, the expectations could fall short unless …show more content…

The company had a budget of $5,247,250, with the flexible budget being $5,117,385, however the final numbers were $5,096,847, which gives the company an unfavorable variance of -$130,065. Total Variable Cost however was a favorable expense. With a planned budget of $3,967,962 and a flexible budget of $3,869,612 the actual output was $3,805,400 the favorable variance came out to $98,349. Contribution margin was also an unfavorable variance (-$31,716). Advertising Expenses went over cost for an unfavorable variance of $3,754 from a standard budget of $28,412 and a flexible budget of $27,708. The extra money spent towards advertising may have been to help boost extra sales towards the end of the year. Transportation Out also went over its budget for an unfavorable variance by $5,607. However, there is more to the Transportation Out than what the budget says. The price of shipment is supposed to be $30 per unit and with 87 less units sold; there should be an extra $2,610 in the budget. This requires extra investigation.

2A. In terms of corrective action, the best course is to focus on where the points where there were unfavorable variances. A key point to that would be to also create realistic predictions of sales and budget. By predicting a high sales goal (one that exceeds the amount of units sold the year prior), Competition Bikes is potentially setting itself up for another down year. To prevent another unfavorable variance in Net

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