Financial Analysis Task 2
Financial Analysis Task 2
A1. Concerns
There are a couple of concerns with Competition Bikes Inc., ProForma for year 9. The first concern is the amount of money that is allocated to research and development. For the previous three years, they have been all over the board with their budgets. The sixth year was $71,460, the seventh year was $98,280, and the eight year was $82,284. This is concerning that the budget has fluctuated so much. In the ninth year they have allocated $85,861. This budget line item should be analyzed so there is not so much variance in the budget between year to year.
Another concern is the amount of carbon fiber sheets that are going to be purchased. It takes 42 sheets to produce 1 bike. Times this by the number the company is planning on producing, 3,510, which will equal the exact amount budgeted for carbon fiber sheets. This would work well in theory, but in reality when you create a product, there is going to be waste material. The amount budgeted to the carbon fiber sheets needs to be upped. This number is assuming there will be no waste. That is usually never the case in manufacturing. The budget for carbon fiber sheets is a concern, and should be budgeted to be higher than the expected amount in manufacturing. There are currently carbon sheets that are located in the companies stock that could be used in the case of waste happening. This way the company will not have to delay shipments when they run out of carbon sheets. The company will still need to budget a little more to replace the sheets are that are currently in stock, so production will never stop, because they are awaiting a shipment of carbon sheets.
Another concern about the ProForma is the amount of bikes that are going to be built. They have budgeted to build 3,510 bikes in year nine. According to the storyline there is a 15% drop in sales for the year due to an economic downturn. This amount is a concern, because sales will likely remain flat, and will not
A1. Concerns
There are a couple of concerns with Competition Bikes Inc., ProForma for year 9. The first concern is the amount of money that is allocated to research and development. For the previous three years, they have been all over the board with their budgets. The sixth year was $71,460, the seventh year was $98,280, and the eight year was $82,284. This is concerning that the budget has fluctuated so much. In the ninth year they have allocated $85,861. This budget line item should be analyzed so there is not so much variance in the budget between year to year.
Another concern is the amount of carbon fiber sheets that are going to be purchased. It takes 42 sheets to produce 1 bike. Times this by the number the company is planning on producing, 3,510, which will equal the exact amount budgeted for carbon fiber sheets. This would work well in theory, but in reality when you create a product, there is going to be waste material. The amount budgeted to the carbon fiber sheets needs to be upped. This number is assuming there will be no waste. That is usually never the case in manufacturing. The budget for carbon fiber sheets is a concern, and should be budgeted to be higher than the expected amount in manufacturing. There are currently carbon sheets that are located in the companies stock that could be used in the case of waste happening. This way the company will not have to delay shipments when they run out of carbon sheets. The company will still need to budget a little more to replace the sheets are that are currently in stock, so production will never stop, because they are awaiting a shipment of carbon sheets.
Another concern about the ProForma is the amount of bikes that are going to be built. They have budgeted to build 3,510 bikes in year nine. According to the storyline there is a 15% drop in sales for the year due to an economic downturn. This amount is a concern, because sales will likely remain flat, and will not