JET2 TASK 2

Topics: Budget, Net income, Cost Pages: 3 (1433 words) Published: October 26, 2014

A1.
During the evaluation of Competition Bike’s budget schedule a few areas of concerns were identified within the budgeting and proformas. The first area of concern within budget was advertising. The advertising was budgeted for $28,412; they may want to consider increasing their marketing to reach a wider audience to boost sales. In year 6 the advertising was $23,820, then increased year 7 $32,760, and year in 8 decreased to $27,428. They need to increase their exposure within the bike market. They need to consider redoing their website, the website allows them to reach a wider audience 24 hours a day 7 days a week. Increasing advertising could be a favorable outcome on net sales since net sales were down in year 8 by -15%. Net sales are another area of concern within the budgeting schedule. They need to increase the net sales to meet their $5,247,450 budget for year 9. The budget chosen is too high for year 9. In year 6 the net sales were at $4,485, 000 then it increased to $5,980,000, by year 8 the net sales decreased to $5,083,000. The bottom line is more people need to place costume bike orders. They maybe need to think about decreasing their raw materials costs to increase their revenue. Executive compensation is also an area of concern because they budgeted $220,000. In year 6 the compensation was at $170,000, year 8 it increased to $220,000, then in year 9 the compensation stayed at $220,000. The executive’s salaries should have decreased in year 8 when their net sales decreased within that year. The salaries should be based off how well the company is doing. They should not be keeping the salaries the same or increasing if it did not fit in with how well the business was doing. Competition Bikes has to change the way they paying the executives, the companies financial strength has to be reviewed before they can determine what the executives are paid. Research and development was an area of concern with the $85,237 budgeted. In year 6 they ended...
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