Preview

Gbt1 Task 3 Summary

Better Essays
Open Document
Open Document
4026 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Gbt1 Task 3 Summary
Summary Report Competition Bikes, Inc.

1. Discuss specific budgetary items that raise concern in the budget planning (Spreadsheet Tab: Task 2_Budgets_and_Proformas).
In this discussion, I want to focus on some concerns in the budget planning for Competition Bike’s Inc. (CBI) for year nine. A budget for a company “…represents a detailed analysis of how a company expects to spend money in future time periods.” (Vitez, 2014)
Sales: The first budget item I want to focus on are sales forecasted for year nine which are $5,247,450. Let’s review sales from prior years. Sales for years six were $4,485,000, an increase by 33.3 percent to $5,980,000 in year seven. Between years seven and eight, sales dropped 15 percent to $5,083,000.
…show more content…
Reaction to unfavorable price variance and efficiency variance for manufacturing overhead: Unfortunately the price and efficiency variance were both unfavorable for CBI.
Corrective action for activity variance for manufacturing between the planning budget and the actual budget: CBI’s management needs to calculate the manufacturing overhead per bike and monitor manufacturing overhead on a monthly basis.
Corrective action for manufacturing overhead in the revenue and spending variance: CBI’s management had to incur higher labor cost and this is now reflected in the revenue and spending variance for manufacturing overhead. CBI’s management needs to examine its manufacturing overhead and find the cause for an unfavorable outcome between the actual budget and the flexible budget.
Corrective action for manufacturing overhead in the price variance: Again CBI’s management has to deal with fluctuation when it comes to the price variances in the manufacturing overhead. Manufacturing overhead should be continuously monitored on a monthly
…show more content…
Nevertheless CBI’s management had to spend $171,000 in administrative salaries. A possible cause could be higher admin costs during times when sales were unusually higher and required CBI’s management to authorize overtime.
Reaction in revenue and spending variance: Higher spending on administrative salaries created an unfavorable outcome.
Corrective action for administrative salaries: CBI’s management should implement the same system for admins that I suggested for their manufacturing personnel. Give time off during slow times in exchange for longer hours during peak times.

Fixed General and Admin Expenses: CBI management had budgeted $170,000 per years in both their flexible budget and their planning budget. CBI spent $2000 more on other general and administrative admin experience. A possible cause could have been overtime during peak times.
Reaction in revenue and spending variance: Unfortunately CBI”s management spend $2000 more in the actual budget and created an unfavorable outcome.
Corrective action: CBI’s management needs to monitor these expenses on a monthly basis to ensure that the budget amount in not higher than originally budgeted

You May Also Find These Documents Helpful

  • Powerful Essays

    Bridgton Industries owns and operates an Automotive Component & Fabrication Plant (ACF). The valuation of the products produced by ACF is based on their respective degree of cost competitiveness. Products that have a cost equal to or lower than competitors’ manufacturing cost are considered to be of the greatest value to the company. ACF’s manufacturing costs include Direct Material, Direct Labor and the respective allocation of the plant’s collective overhead. The overhead and direct labor dollars for model years 1987 through 1990 is stated in Appendix A, as presented in the Harvard Business School 9-190-085 case study. For the 1987 model year, overhead was applied to the products as a percentage of direct labor cost for the production of the respective product. This overhead percentage was calculated “at budget time” and then applied throughout the 1987 production year.…

    • 1601 Words
    • 7 Pages
    Powerful Essays
  • Satisfactory Essays

    This means that every machine hour costs the business $2.70. Therefore, during a year that incurs 132,600 hours, we can say that budgeted costs are $358,020, which is a favorable variance from actual costs of $363,036. Remember, when expenses are lower than expected it is favorable, but if revenues are lower than expected it is unfavorable. Many professors often ask you to explain this in your response.…

    • 391 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Jet task2

    • 854 Words
    • 4 Pages

    For example, if we experience a month that has more orders than expected, we can increase the budget allowance for certain variable costs. On the opposite side of the spectrum, if we experience a downturn, we can cut the budget to avoid overspending on a slow month.…

    • 854 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Jet task 2

    • 421 Words
    • 2 Pages

    In the Budgeted Income Statement, Competition Bikes has budgeted $1340038 for Selling, General, and Administrative Expenses. This is a little high as in year 7, when the highest number of units was sold, that category totaled $1322075. Sometimes this number is budgeted high to help show how well the company managed the budget, as they have built in extra that they know that they can beat. This is not in the best interest of the company, however, because the goal is not aggressively set, and there is no real push to beat the budgeted amount. The other concern with this area is that a lot of the key components in this category should remain relatively similar to previous years. For example, Executive Compensation, Employment taxes, Payroll Service, Depreciation Expense, and Administrative Salaries were the exact same for Years 7 & 8. Given that these should remain the same in year 9; it is unclear why the company is budgeting more than $50,000 in this area than the previous year. I would suggest that the budgeted amount be somewhere between the year 7 & 8 amounts, given the positive prediction…

    • 421 Words
    • 2 Pages
    Good Essays
  • Good Essays

    Financial Analysis Task 2

    • 2376 Words
    • 10 Pages

    There are a couple of concerns with Competition Bikes Inc., ProForma for year 9. The first concern is the amount of money that is allocated to research and development. For the previous three years, they have been all over the board with their budgets. The sixth year was $71,460, the seventh year was $98,280, and the eight year was $82,284. This is concerning that the budget has fluctuated so much. In the ninth year they have allocated $85,861. This budget line item should be analyzed so there is not so much variance in the budget between year to year.…

    • 2376 Words
    • 10 Pages
    Good Essays
  • Good Essays

    JET2 Task 4

    • 1491 Words
    • 6 Pages

    This volume metric, however, is not the driving factor for manufacturing overhead expenses in fact this method is designed more for departmental focus. It can also be very inaccurate as there is little to no relations between the actual costs and the activity these costs are being signed to. This method often causes inaccuracies. It is in the company’s best interest to switch, as many companies are doing, to an activity-based costing system.…

    • 1491 Words
    • 6 Pages
    Good Essays
  • Satisfactory Essays

    The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.…

    • 254 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Managerial Accounting

    • 448 Words
    • 2 Pages

    Chapter 3 Solutions, 3rd day Exercise 3-13 (15 minutes) 1. | Actual manufacturing overhead costs | | $ 48,000 | | Manufacturing overhead applied: 10,000 MH × $5 per MH | | 50,000 | | Overapplied overhead cost | | $ 2,000 | | | | | 2. | Direct materials: | | | | Raw materials inventory, beginning | $ 8,000 | | | Add: Purchases of raw materials | 32,000 | | | Raw materials available for use | 40,000 | | | Deduct: Raw materials inventory, ending | 7,000 | | | Raw materials used in production | | $ 33,000 | | Direct labor | | 40,000 | | Manufacturing overhead cost applied to work in process | | 50,000 | | Total manufacturing cost | | 123,000 | | Add: Work in process, beginning | | 6,000 | | | | 129,000 | | Deduct: Work in process, ending | | 7,500 | | Cost of goods manufactured | | $121,500 | | | | | Problem 3-24 (60 minutes) 1. a. b. | Actual manufacturing overhead costs: | | | Insurance, factory | $ 7,000 | | Depreciation of equipment | 18,000 | |…

    • 448 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Appendix 3

    • 442 Words
    • 7 Pages

    Overhead costs may include minor direct costs when they are so insignificant that they cannot be practically treated as direct expenses. Therefore, overhead expenses are part of the total costs of maintaining and staffing a business.…

    • 442 Words
    • 7 Pages
    Good Essays
  • Good Essays

    For this task I preformed an analysis of the financials of Competition Bikes, Inc. In the following pages I will discuss my findings in detail. I will find weaknesses and strengths as well as indicators of how the company’s financial health is. Also included will be some potential ways to make adjustments to correct the weaknesses. Some of the operational strengths and weaknesses were identified by reviewing the horizontal, vertical, trend, and ratio analysis of the current and past financial situation. For the conclusion the strengths and weaknesses of the internal controls in place will be identified as well as solutions and some possible issues related to the Sarbanes-Oxley…

    • 2299 Words
    • 10 Pages
    Good Essays
  • Good Essays

    Variance Analysis

    • 477 Words
    • 2 Pages

    Since supplies were lower it made a positive variance for the budget, while salaries made a negative variance. Did the variance cause a break even for the explanation of higher salaried? The explanation of the higher salaries payout will need an explanation because it causes a negative variance. What needs to be…

    • 477 Words
    • 2 Pages
    Good Essays
  • Better Essays

    Competition Bikes Task 1

    • 5733 Words
    • 23 Pages

    This report will provide a financial analysis and evaluation of Competition Bikes, Inc financial statements over a select range of financial years reported by the company. The financial analysis will assist the company in identifying strengths and weaknesses, with recommendations in areas of improvement to strengthen its financial position in hopes to induce overall efficiency of operations.…

    • 5733 Words
    • 23 Pages
    Better Essays
  • Powerful Essays

    Revenues /Sales: Estimated revenues are computed by using a combination of study A, B, C, and I.…

    • 998 Words
    • 4 Pages
    Powerful Essays
  • Powerful Essays

    Acc 4291 Case Study

    • 4922 Words
    • 20 Pages

    overhead. If the basis of disagreement is on the outcome of budgeting then the whole budgeting…

    • 4922 Words
    • 20 Pages
    Powerful Essays
  • Powerful Essays

    This underscores the point that the significant increases in net incomes will more than absorb and diminish the effects of these modest increases in expenses. For instance, CSI would have increased their earnings by $147,803 in year 19 as against an increase of $32,821of expenses within the same intervening period. What can be deduced from this is that CSI will be more profitable as a result of higher profits and lower expenses, suggesting better efficiency and increasing…

    • 4922 Words
    • 20 Pages
    Powerful Essays