Create the revenue and expense budgets

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Reference no: EM132223706

Budgeting for Managers Assignment -

Background: The parent company, BiltMore Bicycle Corporation (BMBC), is considering some major adjustments in the direction of the company, based on current economic and societal changes. You will be asked to project financial statements, project performance, analyze results, and make recommendations based on your results that will be used to take BMBC into the next generation of bicycle enthusiasts.

Each week a different aspect of the corporation will be provided for your decision making, calculations, projection, and recommendation. You will prepare budgeted and comparative actual income statements for all three companies: BRBC, BRBS, BRMS. Then you will combine them into the Consolidated Income Statement of BMBC. Your decisions at each step will impact the overall financial health of the corporation.

Built Right Bike Company (BRBC) is an established manufacturer of quality bicycles. They manufacture three styles of bicycles.

Bicycle A is a popular racing bicycle primarily sold to dealers in the bicycle racing circuit. Their material is lightweight and durable with detachable joints for easy disassembly and storage. This market has been declining over the past couple years.

Bicycle B is a sturdy leisure bike typically sold to resorts for use by vacationers. This market is stable with regular replacement bikes ordered as well as new resorts and hotel expansions.

Bicycle C is the usual bicycle used by families and children and is the primary bicycle sold by the company outlet store Buy-Right Bike Shop (BRBS).

The outlet store, Buy-Right Bike Shop (BRBS), was opened two years ago and has shown excellent growth with potential for further expansion. BRBS has both an instore and online presence, with the majority of growth coming through online sales. As a result, a large warehouse is used for shipping bicycles all over the world.

Just this past year the need became apparent for bicycle maintenance and repair, so the Bike Repair & Maintenance Shop (BRMS) was opened adjacent to BRBS. This service business provides repair services for bicycles.

Overview: You will use Excel to create and complete operating budgets (also called a proforma) for three related companies. During weeks 1-6, you will create the revenue and expense budgets compared with actual results for a Retail Shop, Service Provider, and manufacturing company. During week 7, you will analyze your results, and write an Executive Summary describing your course project.

Below are some of the decisions that will need to be made for each company that you will be working on.

Built Right Bike Company (BRBC)

a) Should BRBC stop making bicycle A? What is the impact of dropping Bike A from the line of products? Assume the other two product lines will not change in volumes or selling prices.

b) Should the price of Bike C be lowered? Consider the volume sold to sister company BRBS at only $52 per bike, which is eliminated when the corporation financial statements are consolidated. What happens if the price to all others is reduced to $75, and an additional 20,000 bikes were sold at this lower price (not counting any intercompany BRBS sales).

c) Should the company change its advertising focus? What would be the impact of increasing Bike C's volume and decrease in Bike A's volume by 10,000 units each? Disregard units sold to sister company BRBS.

d) Should the price of Bike C be lowered with the change to advertising focus? What is the impact if we lower the price of Bike C to $75 and shift advertising focus more to Bike C, potentially decreasing Bike A volume by 10,000 bikes and increasing Bike C volume by 30,000 bikes.

Buy-Right Bike Shop (BRBS)

a) Currently, only Bike C is budgeted to be sold at BRBS in store. Should Bike A and/or Bike B also be sold?

b) Budgeted profit margin is 17%, but the Board expects a 25% margin, so they can continue to give back to the community 10% of instore sales. How can the store increase their profit margin to 25%?

c) To increase sales the store will need to increase store sales staff. Currently sales staff are paid $15 per hour and instore sales staff receive a bonus of 10% of instore sales (total divided among instore sales staff). How many additional sales staff will be needed to meet projected sales increases and profit margin?

d) BRBS is considering starting two bicycle clubs - one leisure and one competitive, in conjunction with the local YMCA. These would be community activities to increase physical activity and fitness, but would also bring awareness of BRBS and potentially increase sales. How would the costs of these activities be shown in the financial statements?

Bike Repair & Maintenance Shop (BRMS)

a) For the first year of operations, BRMS is budgeted to lose over $40,000. The current repairs have high fixed costs for the replacement parts in the repairs. If BRMS decided to expand their services to provide bicycle inspections and preventative maintenance, which use more employee time than supplies, what would the projected change in profit be?

b) If a decision is made to add more service oriented repairs what is the change in fixed and variable costs?

More details on each of these will be provided with the assignments.

Attachment:- Assignment Files.rar

Reference no: EM132223706

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Reviews

len2223706

1/28/2019 2:12:49 AM

Guidelines: Specific guidelines will be provided for each week’s assignment. Each weekly project will build on previous project assignments in the same Excel Workbook. Always use formulas where possible so your computations can be followed and to enable corrections after instructor feedback.

1/28/2019 2:12:42 AM

Grading: This project represents 35% of your course grade. The building blocks will be graded each week, and your corrections to those will culminate in the final submission in week 7. Scores are based on accuracy of your submission, following directions, and use of critical thinking and decision making. Specific grading details are included in the directions for each assignment. Grading for this assignment will be as follows: (110 points) Week 1- Budget template and drivers- 10 points, Week 2- Income statement for BRBC – 10 points, Week 3- Revenue and expenses for BRBC – Retail industry- 10 points, Week 4- Income statement for BRMS - Service Industry- 10 points, Week 5- Income statement for BRBC – Manufacturing industry- 10 points, Week 6- Combined financial statements - 10 points, Week 7- Final project including Variance analysis, financial analysis and ratio analysis & Executive summary- 50 points.

1/28/2019 2:12:37 AM

Due Date: The course project weekly deliverable is due by 11:59 pm EST Sunday each week (except week 7). A key part of this project will be the use of Microsoft Excel. If you are not familiar with Excel, you will find many YouTube videos on various aspects of using excel. The instructor will also provide some information on using Excel in your weekly project explanations.

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