# Baldwin Bike Company

Pages: 2 (605 words) Published: November 1, 2014

After our discussion we decide to accept the order of Hi-Valu Company, due to analysis and compare below. Advantages
Outstanding profit
Assume that Baldwin Company accepted the orders of Hi-Valu Company to make profits. In this condition, we should know whether Hi-Valu Company had enough short term assets to cover its short term debt.

Therefore, we should calculate Working Capital (\$) of Baldwin Company: The cost of each finished product in the first year:
Materials + labors + variable cost (24.5*40%)=39.8 + 19.6 + 9.8=\$69.2 Inventory
Finished products: 69.2*4,500(inventories in warehouses)=\$311,400 Semi-finished products: (39.8 + 19.6)*1,000=\$59,400
Materials: 39.8*25,000(sale of products per year)*2/12(two months)=\$165,833.33 Total inventory=311,400+59,400+165,833.33=\$536,633.33—inv.* Account Receivable /Inventory =1,359,000/2,756,000=0.49
Account Payable /Inventory =512,000/2,756,000=0.19
Account Receivable*=0.49*536,633.33(inv1)=\$262,950.33—A/C* Account Payable*=0.19*536,633.33(inv1)=\$101,960.33—A/P*
Working Capital
Current assets-Current liabilities =inv.*+(A/R*-A/P*)=536,633.333+(262,950.33-101,690.33)=\$697,623.33 697,623.33*23.5%(cost rate of capital)=\$163,941.48
51435069850Account Receivable, Account Payable and Inventory represented here are the numbers of Financial Statements in1982. A/C* , A/P* and inv.* represented here are the working capital we used to calculate. 020000Account Receivable, Account Payable and Inventory represented here are the numbers of Financial Statements in1982. A/C* , A/P* and inv.* represented here are the working capital we used to calculate.

Producing 25,000 products need \$163,941 working capital (per year). Therefore, producing each product needs (163,941/25,000)=\$6.558 working capital(per year). The profit per unit = 92.29(price of sale)-69.2(cost of first year)-6.558(cost of capital)=\$16.532 Total profit=16.532*25,000=413,300 dollars

Improve productivity
Because the trend of bicycle in America...