...JET2 TASK 2 1 JET 2 TASK 2: Financial Analysis Theo Adams Western Governors University MBA Program JET2 TASK 2 2 (A1) Budget Concerns Investopedia defines Budget as an "estimation of the expenses and revenues over a specific future period of time. Budgets can be made for a group of people, family, person, country, business, government, organization or anything else that makes or spend money. The budget is a micro economic concept that shows the trade-offs made when one good is exchange for another." When looking at the year 9 budget for CB first thing that jumped out at me was the sales goal of 3510 is a 5247450. This is my first immediate concern considering that the storyline has clearly stated it is a down market due to the reductions in monies for sponsored professional riders from their sponsors. This is the main sources sales for the Carbonlite model from CB. The professional riders not having the same resources they had in year 7 when sales went to 4000 from the 3000 sold in year 6. which meant CB's revenue went from 4485000 in year 6 to 5980000 in year 7. This 33.3% jump was followed by 15% drop from 4000 units sold in year 7 to 3400 units sold in year 8. Again this drop was due to the cut in sponsorship money for the professional riders which ended up reflecting at the drop in revenue as well from year 7 to 8 of 5980000 to 4485000. These facts do not seem to warrant an increase in sales from 3400 units to 3510 units and an Increased Revenue to 5247450. Even...
Words: 2595 - Pages: 11
...JET2 Task 2 A1. Concerns There are many concerns with the budget planning for Competition Bike. From year 2006 to 2008, Competition Bike experienced a 13.3% increase in sales. In year 9, sales are projected to increase to 3510 units to give sales revenue of $5,247,450. This is a bold increase after 3400 units sold in 2008 and 4000 sold in 2007. I do not think the sales will be as robust with the economy rebounding. Sales projections should be 3425 with net sales at $5,120,375. Since the Competition Bike Company projected overly optimistic sales, there are several areas in the budget that will be affected. The areas affected are Sales Commission, Transportation Out, Advertising, Research and Development, Raw Materials, and Labor. * Sales Commission: With commissions budgeted for 3% of sales revenue, this amount is budgeted too high since the budgeted net sales is inflated * Advertising: This expense line will be incorrect due to it being based on 2% of the Gross Margin. The Gross Margin will be off due to inflated projections. * Raw Materials: Due to inflated sales projections, the raw materials cost should be lowered to reflect a realistic net sales projection. * Labor: Labor cost should be reduced due to fewer hours being used with my projection of fewer units being sold as compared to the 2009 projections. It takes 15 hours/unit, so with fewer than projected sales, this should be reduced. * Transportation Out: Since the projected sales...
Words: 2195 - Pages: 9
...Stacy Raudman 000202145 JET2 Task 2 A1 Discuss budgetary areas that raise concern in the budget planning In any business, a budget serves a specific purpose. It serves as a forecast of money coming in and money going out which then shows whether or not there is a profit. It also serves as a tool for making decisions. And, lastly, it is a means to monitor how a business is performing. Watching for profits and/or losses, will tell a company if their strategies are working or not and whether they should move in a different direction for improvement. Money, in any business, needs to be controlled and decisions need to be made on where is best for that money to be spent in the best interest of the company. Monitoring how a business is performing can tell management or investors if the company is living up to their expectations. If it isn't, the company can have the opportunity to move in a different direction for improvement. In reviewing the budget and proforma statement for Competition Bikes, there are a few areas of concern which are discussed below. In 2006, the company sold 3000 units and had a nice increase in sales in 2007 to 4000 units. In year 8 however, there was a decrease in sales down to 3400 units. The company is forecasting sales in 2009 to be 3510 units and continuing increasing the following two years as well. Due to the stated economic decline and cut back on sponsors that pay for bikes for professional riders, the company is anticipating...
Words: 1665 - Pages: 7
...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 not be needed. 2. Competition Bikes has budgeted $150,000 for utilities for year nine the same as year eights. In year seven Competition Bikes only spent $135,000 on utilities and they produced 4000 units compared to year eights 3400 units. The utilities budget is too high it should be lowered because less units than 4000 will be produced. 3. Total cost of frame materials is $1,326,778 to produce 3510 units, they have budgeted too high for raw materials need for year nine for two reasons. One they have over projected on the amount of units they will sell in year nine. Two Competition Bikes has $91, 573 in raw materials and $130,260 of work in process inventory from year eight that can be used in year nine to reduce this cost. 4. Other General and Admin expenses...
Words: 1535 - Pages: 7
...Abke Western Governor’s University Table of Contents Preface: Master Budget………………………………………………………………………….3 1. Summary Report for Budgets…………………........................................................................4 2. Concerns of Budget Planning and Profomas…….....................................................................4 3. Evaluation of Flexible Budget and Variances………………...................................................5 4. Identify, Described, Analyze, and Outcomes…………………………………………………6 5. Favorable or Unfavorable…………………………………………………………………..…6 6. Reaction to Changes………………………………………………………………..…………6 7. Results of Budget …………………………………………………………………………….6 8. Corrective Action for Variance Analysis……..........................................................................6 9. Concepts of Management by Exception (MBE).......................................................................7 10. Choosing a Flexible Budget…………………………………………………………………..8 11. Reference Page………………………………..........................................................................9 Competition Bikes, Inc. MASTER BUDGET 1. Management anticipates that the market will improve moderately during the coming year. 2. The Sales forecast is 3510 CarbonLite units in Year 9. 3. No change in this pricing is expected for the coming year. 4. Factory overhead will be has been budgeted at $481,798 for the year. This figure includes $150,000 in manufacturing...
Words: 1883 - Pages: 8
...Running head: JET2 TASK 2 1 JET2 Task 2 Budgeting Bonnie Wilson Western Governors University JET2 TASK 2 A.1. Operational Strengths and Weaknesses A.1. Budget Concerns 2 Revenue from sales is budgeted too high. In year 8 Competition Bikes experienced a 15% decline in sales revenue, and yet for year 9, they have budgeted for a 3.2% increase. This is likely to be an overly optimistic projection and relies heavily on economic factors outside of the company’s control. Inaccuracy in this projection will have a negative impact on the rest of the budget. Advertising is budgeted too low. The year 9 budgeted amount of $28,412 represents a 3.5% increase over year 8, but it is still almost 20% shy of the amount spent on advertising in year 7 when sales were at an all time high. If the company is to have any hope of realizing its revenue projection, then the amount budgeted for advertising is too low. Executive compensation is budgeted too high. In year 7 executive compensation increased by $50,000 dollars. This made sense then because sales had increased by 33%. However, holding that number steady in year 8 when there was a 15% decrease, and again in year 9 when even a 3.2% increase is optimistic, is not a financially sound budgeting decision. Research and development is budgeted too low. The budgeted amount for year 9 is $85,237. While this represents the same 1.6% of sales revenue that Competition Bikes consistently allots, research and development is an investment in the...
Words: 1470 - Pages: 6
...Introduction: In this task you will prepare a presentation for the chief financial officer (CFO) to present to a bank vice president. The bank vice president will decide if the bank will approve a $1,000,000 funding request for the European expansion of Custom Snowboards Inc. currently under consideration. The bank has not confirmed it is willing to consider a $1,000,000 loan. The bank will make its assessment of the risk associated with the loan after your presentation. You will prepare another presentation to present directly to the chief executive officer (CEO) of Custom Snowboards Inc. The presentation will include a recommendation on how to proceed with the expansion plans. The presentations can assume the form of a presentation or a report. You may combine the two or submit them separately. Be sure to enter your first initial and last name on the first worksheet in Custom Snowboards, Inc. Financial Data excel document. Task: Note: Be sure to submit a copy of your Excel workbook when submitting your JET2 Task 5 work. When you enter your first initial and last name at the top of the Income Statement you are given a dataset that is based on your name. The evaluator will need a copy of your data to ensure correct evaluation. Note: Your presentations may be in a variety of formats (e.g., report, multimedia presentation). A. Create a presentation or report for the chief financial officer in which you do the following: 1. Summarize the key points of...
Words: 667 - Pages: 3
...Introduction: In this task you will prepare a presentation for the chief financial officer (CFO) to present to a bank vice president. The bank vice president will decide if the bank will approve a $1,000,000 funding request for the European expansion of Custom Snowboards Inc. currently under consideration. The bank has not confirmed it is willing to consider a $1,000,000 loan. The bank will make its assessment of the risk associated with the loan after your presentation. You will prepare another presentation to present directly to the chief executive officer (CEO) of Custom Snowboards Inc. The presentation will include a recommendation on how to proceed with the expansion plans. The presentations can assume the form of a presentation or a report. You may combine the two or submit them separately. Be sure to enter your first initial and last name on the first worksheet in Custom Snowboards, Inc. Financial Data excel document. Task: Note: Be sure to submit a copy of your Excel workbook when submitting your JET2 Task 5 work. When you enter your first initial and last name at the top of the Income Statement you are given a dataset that is based on your name. The evaluator will need a copy of your data to ensure correct evaluation. Note: Your presentations may be in a variety of formats (e.g., report, multimedia presentation). A. Create a presentation or report for the chief financial officer in which you do the following: 1. Summarize the key points...
Words: 497 - Pages: 2
...[pic]RJET Task 1 | | | | | | | |Help on this Page | |Directions | | | |SUBDOMAINS: 326.1 - MANAGING INTERNAL COST & CONTROLLING FINANCES | |326.2 - MANAGING CAPITAL AND FINANCIAL ASSETS | |326.4 - MANAGING ENTERPRISE RISK & CONTINUITY | |329.4 - MANAGING OPERATIONS | | | |Competencies: 326.1.1: Financial Analysis - The graduate analyzes and benchmarks financial statements, evaluates company | |performance, identifies...
Words: 549 - Pages: 3
...JET2 - Financial Analysis - Task 4 JET2 – Task 4 A1. Costing Method Costing is used in business accounting strategies as a way of determining cost of manufacturing a product in relation to the revenue generated by that product. Costing systems determine the overhead of production and then allocate those overhead costs to a business’s product. There are two common methods for allocating these indirect costs to products, traditional costing and activity based costing. Both of these methods assess overhead costs and then attach these costs to products based on certain cost drivers, “a factor that causes cost to incur, such as machine hours, direct labor hours and direct material hours (Johnson 2014).” The first of these methods is Traditional Costing. This costing method drops all overhead costs into one bucket and then disperses them across three drivers, units produced, labor, and machine hours. Although this method works well for lines that are similar and consistent, one of its drawbacks is that this method does not account for customization requirements and overall complexity of the lines. So the company ends up allocating the same cost drivers across all production lines. The second method is Activity Based Costing. Activity based costing on the other hand, utilizes multiple cost pools as it relates to overhead costs based on resources used. Overall, this is a better cost system methodology for the company as it allows for the customization and specialty line...
Words: 2113 - Pages: 9
...Introduction: JET2 Task 2 Summary Report for Budgetary Planning Competition Bikes, Inc. will be reviewed for its various budgets and for its budgetary planning. Budgets are the main planning tool in all businesses that are used by managers to executive management to make decisions for the company. Cash flow is the bloodline of any organization’s operation including operating activities that determine how much cash stays in the organization called revenues and how much is paid out as an expense or liability. Competition Bikes Inc. makes bicycles for professional riders who compete in road races such as triathlons and biathlons. The bikes have an extraordinary success rate and the product consistently finishes in the winners bracket approximately sixty percent of the time. However, due to the recent economic situation Competition Bikes, Inc. has experience a recent decline of approximately 15 percent in its bicycle sales which the trend expecting to continue for the next thirty six months. This review will provide an analysis and provide recommendation for improving budget planning for the company in a summary report Task: Note: submit a copy of your Excel workbook when submitting your JET2 Task 2 work. . A. Prepare a summary report in which you do the following: 1. Discussion of budgetary areas that raise concern in the budget planning. One of the biggest issues when creating budgets is that there is no absolute way of knowing what next year...
Words: 2261 - Pages: 10
...WGU JET2 Financial Analysis Task 2 By Kat-Johnson | March 2014 * Zoom In * Zoom Out Page of 9 Competition Bikes Inc. Storyline Operational Analysis 03/10/2014 WGU JET2 Financial Analysis Task 2 Introduction In this task, the budget schedule and proformas as well as the flexible budget were reviewed. Below you will find my analysis and recommended corrective actions as well as how management by exception applies. Budget Planning Concerns Competition Bikes has a good starting point for a budget but is overall weak and has several budgetary concerns. A few of those items are mentioned for budget planning below. Advertising & Research Development. Competition Bikes is expecting an increase in sales in year 9 yet they are not investing in any more in advertising or research and development. In year 7 when sales were the highest, Competition Bikes spent $32,760 in advertising. In year 8 when the advertising budget fell to $27,428, so did the sales. Although management is predicting an increase in the market for year 9 and the advertising expense is 2% of projected gross margin, this may be unrealistic. Annual Budget. Quarterly budgets are more efficient for planning, coordinating, evaluating, and controlling costs. The budget for Competition Bikes only shows annually. Sales differ by season with the company so their budget should reflect a similar breakdown. Quarterly budget would be closer to the seasons than just an annual one. Further breakdown...
Words: 2699 - Pages: 11
...| Competition Bikes: Task 1 | | Jamila Mitchell | | Competition Bikes: Task 1 | | Jamila Mitchell | Western Governors University JET2 Financial Analysis Western Governors University JET2 Financial Analysis Competition Bikes: Task 1 Jamila Mitchell Operational Strengths and Weaknesses Horizontal Analysis To evaluate changes in financial statements, a horizontal analysis is necessary so the company can determine whether there is positive or negative growth over time. The changes in percentages is calculated and decisions are made according to the increases or declines. Competition Bikes: Year 7 Overall, year seven was a successful year for the company based on the horizontal analysis of the following financial aspects. Revenue Net sales went from $4,485,000 in year six to $5,980,000 in year seven, an increase of $1,495,000 or a 33.3% increase. The cost of goods sold in year six was $3,294,000, which increased to $4,342,000. This increase of $1,048,000, or 31.8%, was expected considering the increase in net sales. The cost of goods sold remained less than net sales, so this is a strength for the company. While both net sales and cost of goods sold increased, there was still a balance between the two. This shows that the company sold more products at a lower cost, which also attributed to the 37.5% increase in growth profits. Total Selling Expenses Total selling expenses increased from $299,220 in year six to $397,960 in year seven. This was...
Words: 5232 - Pages: 21
...JET2 Financial Analysis Task 1 Western Governors University Kim Laudig, RN, BSN, MSN 11/01/2014 JET2 Financial Analysis Task 1 A1a Horizontal Analysis Results The Horizontal Analysis Results are taken from Competition Bikes’ Income Statements and their Balance Sheets. A Horizontal Analysis looks at data from one year to the next, usually over a three year span. This company’s Horizontal Analysis is comparing year six to year seven and year seven to year eight. While evaluating the company’s operational strengths and weaknesses, and analyzing the results of the Income Statement for years six, seven, and eight, there were several areas of concern. Years seven and eight shows the most areas of concern for the company. However, while analyzing years six and seven, there were some positive results for the company. During years six and seven, there was an increase in revenue. Net sales increased by 33.3% increase. The cost of goods sold also increased. This was an increase of 31.8%. The fact of increase with both of these analysis showed positive results. The increase of net sales should always be more than the increase in cost of goods. If this does not happen, than the company is spending more on parts and supplies than they are making on goods sold. This also showed the company was able to sell more bikes at a lower cost than they had to spend on the supplies needed to make the bikes. This was proven by the company showing a 37.5% increase in gross profit...
Words: 5846 - Pages: 24
...JET2 – Task 4 Financial Statement Analysis Managing Internal Cost & Controlling Finances Summary Report In response to a request from the Vice President of Competition Bikes for an analysis and recommendation regarding Activity Base Costing, as well as a request for a break-even analysis with projections of the company’s target profit, I have developed the following report. 1. Costing Method Evaluation Traditional Costing and Activity Based Costing (ABC) are the two systems we will evaluate in relation to Competition Bikes’ operations. To do so, we will need to look at the advantages and disadvantages of both systems. Costing systems are used to help predict the profitability of a product and help establish the cost of a product correlated to the income it generates. Traditional costing allocates overhead according to the amount of a particular cost driver, for example, how many direct labor hours are required to manufacture a product, while activity based costing looks at each activity and assigns a cost to it. Traditional costing separates costs into direct and indirect categories. The costs of labor or of raw materials would be examples of direct costs. Then, traditional costing divides the total cost of a product by the direct labor cost. This gives us the estimated cost of the product per item. However, increasingly in today’s business environment, the proportion of direct costs have fallen in relation to the proportion...
Words: 3145 - Pages: 13
