A1. Budget 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 for year nine is budgeted at $170,000 the same as year eight, this is too high. In year seven Competition Bikes spent $158,000 and sold 4000 units compared to the 3400 units sold in year eight. Competition Bikes need to

reduce this amount to keep operation cost down because they have proven that they can produce more with less dollars. 5. Utilities and Services is showing