RJET2 Task 2 Budgeting for any company can be a challenge especially when the economy does not change in the companies favor. For Competition Bikes, Inc. (CB) budgeting is an area that is both of great need and seriously lacking. The company is setting high goals to make up for the 15% loss of revenue from year 8 over the next three years. What the company needs to look at is whether or not their goals versus reality are a possibility and not make their budget too high or too low. Budgeting is a science and yet a gamble all at the same time. If the company has a strong budget that is flexible and realistic the company can expect to see great success in the future.
A1: Concerns CB currently is setting a goal of selling 3510 bikes in year 9. During year 8 the company only sold 3400, year 7 was 4000, and year 6 was 3000. By establishing a goal for units sold the company is able to make a budget based on those numbers. The first concern with the budget is the goal of increasing sales by 110 bikes during year 9. While the company may be trying to push its sales to make up for the previous years deficits, they also need to look at what is still happening with the economy. Typically it takes more than a year for the economy to turn around and such a high goal, if not met, could ruin the budget for a second year in a row. CB needs to make a high goal to push its sales personnel to sell more, however with the economy still being down, the goal needs to be more realistic, as meeting and exceeding a goal can do more for staff morale and sales than being under sold all year. CB set a goal of raising sales by approximately 3% for year 9, however with a troubled economy a 1-2% increase may be more financially responsible. The next area of concern is the cash balance of $523,492 at the end of year 9. In year 8 the company ended with $414,038, which is too high of a cash