...Competition Bikes Inc. Horizontal Analysis Competition Bikes Inc. net sales when matched to the previous year were substantially lower. In essence, the current economic changes attributed to this situation. However, the company anticipates per unit transactions will go into a period of growth over three subsequent years, and it will thus continue being profitable. In spite of the noted low sales numbers, the net price of product sold when matched to net sales; stayed at seventy percent. This validates that the raw material values and labor inputs have remained consistent. In addition, the price for advertising was lower by 16.3 percent, which was due to the lower sales data. The first expenses that are often affected are advertising and marketing budgets when the economy takes a downturn. The company expenditures have been pretty continual from the operational beginnings to the present time. One such expenditure is the utilities, 11.1 percent is allocated for energy, which is directly related to an increase utility rates. The next expenditure is administration cost, which encompass about 7.6 percent of expenses in relation to the fifteen percent reduction in sales. In correlation, there is a decrease in operating revenue that is in correlation to the sales numbers, which now stands at fifteen percent. The organization pays utilities, salaries and fixed expenses regardless of sales or the lack of sales. This disrupts the organizations monies in correlation to...
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...[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...
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...Horizontal Analysis Horizontal analysis is one of the two main ways to analysis the financial statements of a business. This analysis provides a year to year look at the financial performance of the business being evaluated. The spreadsheet that is attached provides a horizontal analysis of years 6, 7,and 8 for the balance sheet and income statement for Competitive Bikes and Two Wheel Racing.The horizontal analysis can take into account either the dollar amount of the changes over theyears or the percentage of change for the years. This analysis will consider both items, and willalso be comparing years 6 and 7 and 7 and 8. Year 7 The analysis of years 6 and 7 shows a positive result for Competitive Bikes. RevenueThere was a positive increase in revenue for years 6 and 7. Net sales increased by $1,495,000 between years 6 and 7. This was a 33.3% increase for Competition Bikes. The cost of goodssold increased $1,048,000. This was a 31.8% increase. The fact that net sales increased by33.3%, and cost of goods sold increased by only 31.8% was a significant factor in these twoyears. This was a positive result, because net sales increased more than what the cost of goodssold increased. Competition Bikes found a way to sell more bikes at a lower cost for thecompany. This is why the company had an increase of 37.5% in gross profit.Selling ExpensesTotal selling expenses increased by 33% between years 6 and 7. This was expected, becausemost of the selling expenses are considered variable...
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...RJET TASK 4 A1. COSTING METHOD Activity based costing or ABC accounting as it is called distributes manufacturing overhead costs to products in a smarter way than in the traditional way. This way of simply assigning costs on the basis of machine hours. Activity based costing assigns costs first to the activities that make up the real overhead. Then it assigns a cost to the activities that affect only the products produce. ABC vs Traditional Costing This is one main difference between ABC (Activity Based Costing) and TCA (Traditional Cost Accounting) it is Activity Based Costing is complex and takes more time and effort to figure out and Traditional Cost Accounting is simple and to the point. Activity Based Costing began some time in 1981 so it is still a relatively new costing bases. But Traditional Cost Accounting has been around since the late 1800’s. In TCA you figure the cost of the items used to produce the product and the resources that were alos used. But in the ABC method you only figure the cost for the actual materials that were used to finish the product. Activity Based Costing is a more accurate way of costing produts and is preferred over the Traditional Cost Accounting method. The ABC method is normally implemented when overheads are high and there is a large amount of misc. products. If the product costing method in incorrect then you may be under cutting your competitors, but you might also be losing your profits at the same time. So it is better for the...
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...| Budgeting| RJET Task 2| C.Smith-Barber4/16/2013| A1. Budget Concerns A fiscal document used to plan future revenue and expenditures is a called a budget (Murray, n.d.). The overall process of whether or not the company can continue to run with the projected revenue and expenditures is called budgeting (Murray, n.d.). It is valuable because it helps an organization consume the inadequate financials and human capital for which is best to achieve current business opportunities. A company is also capable of formulating both long-term and short-term strategies for help in implementation and constant assessment of its performance. Competition Bikes (CB) has made a master budget for Year 9 after being on a roller coaster for Year 6-Year 8. Due to the economic downturn, the company experienced a 15% decline in sales during Year 8. It has been budgeted that CB will sale 3510 units at a selling price of $1495 in Year 9 which brings some concern. The number of units has increased compared to the previous year and of Year 6 especially when there has been an economic situation. With the change of the amount of units sold that will also alter the budgeted dollar amount for its raw materials- components’ total cost is $965,250 and the total cost for frame materials is approximately $1.3 million. The accounts payable at $229,203 is too high. CB has always done a better job in paying debts in the past; in Year 6, Competition Bikes had net sales of about $4.5 million...
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...RJET 2 Task 4 Competition Bikes Inc (CB) is now making both CarbonLite and Titanium framed bikes and is therefore in need of re-tooling some of the current practices being used. The company currently uses a traditional based costing (TBC), however an activity based costing (ABC) may be more beneficial. Also, the company’s breakeven point with regards to cost volume profit for each bike type is in question, especially since there is the potential for a $50,000 increase to production facility and a 10% materials cost increase. These areas are under evaluation to help the company navigate the new dual product line production. A1: Costing Method A Traditional Based Costing method looks at the cost to produce a product versus the profits it generates and predicts based on one lump sum. An Activity Based Costing method looks at the whole process to make a product, the activity involved to make the product, and is a more accurate breakdown of the true costs to make a product (Marx, C., 2009). Since most companies make products with both manpower and technology, using the TBC system causes an inaccurate forecast of determining the costs to make a product. TBC looks at what is spent to make a product but not why it was spent. The activity based costing (ABC) is more accurate for determining the actual costs that are spent to make a product because it does not assume that a product generates costs. ABC looks at the costs for each activity and assigns financials based on those activities...
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...RJET Task 1 A. Prepare a summary report in which you do the following: 1. Evaluate the company’s operational strengths and weaknesses based on the following: a. Horizontal analysis results Horizontal analysis is to determine dollar and percentage changes by comparing financial statements. (Investopedia.com, 2011) Between years 6 and 7, Competition Bike Inc.’s net sales increased 33.3% at $1,495,000. Between years 7 and 8, net sales of the product decreased 15.0% with a loss of $897,000. Gross profits increased 37.5% at $447,000 between years 6 and 7, but decreased 16.3% with a loss of $266,600 between years 7 and 8. This clearly demonstrated the weakness of Competition Bikes that it has not met its goal of sales. The total general and administrative expenses increased 20.4% with $156,440 in years 6 and 7. It also increased 1.2% with $11,004 in years 7 and 8. Regarding the utilities cost, there is 11.1% increase in years 7 and 8 comparing the 3.8% increase in years 6 and 7. It also has a continuous growth at other general and admin expenses at 31.1% and 7.6%. This demonstrates the weakness in expenses control. The company cut advertising expense to response to the declining sales in year 7 and 8. It is a weakness that company is unable to respond properly to the market changes. In addition, there is 16.3% decrease of research and development in years 7 and 8 comparing the 37.5% increase in years 6 and 7. Lack of research and development fund is...
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...RJET Task 5 A. Create a report for the chief financial officer in which you do the following: 1. Summarize the key points of the company’s financial picture that could impact the bank officer’s position. In order to analyze the key points of the company’s financial picture, we will need to focus on the following three areas: profitability, liquidity, and solvency. The banker will examine these three areas very closely when considering the loan for the European expansion. Profitability is another term for how much money the company actually makes. Sales and expenses drive profitability. During year 13, sales suffered a decline of 6.44%, but in year 14 have increased by 1.28% over the previous year. This will be a salient point for the banker to consider because it shows that sales are rebounding a bit over the decline in year 12. Another decline was shown in gross profit and selling expenses in year 13 of 6.44% and then increased in year 14 by 1.28%. This is directly related to the sales figures. This demonstrates to the banker that the company managed to maintain its cost of goods sold and its selling expenses during those years. One area that does not show as favorably is the area of general and administrative expenses. These increased by 7.24% in year 13 and by 6.5% in year 14. From these figures, the banker will be able to see that the company did not manage those expenses well during that period of time. These factors all played a role in the decline of 67.66% in...
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