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Baldwin Bicycle Case Study: Strategic Cost Mangement

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Baldwin Bicycle Case Study: Strategic Cost Mangement
| Baldwin Bicycle Case Study | Strategic Cost Managment | | Submitted to-Mr. Suneel Maheshwari | |

By-
Sourabh Dhawan-
Nooruddin Hussain
Nimisha Rathi
Tulika Singhal |

1. What is the relevant cost of manufacturing a challenger bike? Present Situation | | | | Total Revenue | | 10872000 | | Units sold | | 98791 | | P.U Price | | 110.0505 | | | | | | | | | | Hi Valu Proposal | | | | Material | 39.8 | | | Labour | 19.6 | | | Variable Overhead | 9.8 | | | Total VC | 69.2 | | | S.P. | 92.29 | | | Contribution | 23.09 | | | | | | | Additional Cont | 577250 | | 577250 | | | | | Loss Of Sales | | | | Lost unit sales | 3000 | | | S.P. | 110.05 | | | Variable Cost P.U. | 66.55 | | | Contribution | 43.5 | | | Sales Loss | 130500 | | -130500 | | | | | | | | | One Time Set Up Cost | | | -5000 | | | | | | | | | Net Additional revenue | | | 441750 |

The relevant cost of producing challenger bike is 69.2 plus 5000 one time cost, this cost of 5000 is small enough to be written off in first year. On the basis of calculation made, there is an addition to the gross profit to the extent of 441750.

2. What is the “relevant” cost (on per bicycle basis) of carrying the working capital investment involved in the challenger deal?

Inventory Costs | | yearly | | monthly | P.U | Total | Materials | | 25000 | 2 moths | 4166.67 | 39.8 | 165833.5 | WIP | | | | 1000 | 54.5 | 54500 | Finished Goods | | | | 500 | 69.2 | 34600 | Goods delivered to warehouse | | 25000 | avg 2months | 4166.67 | 69.2 | 288333.6 | A/R 30 days | | 25000 | 30 days | 2083.33 | 69.2 | 144166.4 | total inventory costs | | | | | | 687433.5 | | | | | | | | Additional asset Cost | | | | | | | | | |
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