Summary: Historicity Of Csi's Snowboarding Industry
Considerations for the Bank Loan
Historicity of CSI’s Snowboarding Industry:
Before the bank can approve or decline a facility to CSI, they would need to evaluate the snowboarding industry in the US in particular, and across Europe in general.
From the various literature reviews available, Snowboarding is seen as a marginal sport, which is increasing in popularity especially after the winter Olympics. Chernow (2011) noted that over nine million teen and young adult participate in snowboarding in the US and over the last ten years, these numbers have continued to increase.
As a result of the increasing popularity of the sport, the market potential for snowboarding is also on the increase and CSI is well positioned to harness this growing …show more content…
Looking at the capital budget of CSI, it indicates that the company’s profit potentials for years 15 to 19 will improve significantly with the European expansion. The projected net income from the European operations for years 15-19 are-$44,608, $80,717, $124,357, $164,567 and $192,411 respectively (JET2, 2013, p. Capital Budgeting).
It is interesting to note that net incomes of CSI is increasing at a faster pace than it’s expenses over the projected five-year period. For example, the total selling and administrative expenses increased by a mere $32,821 over 5 years. In year 15 it was $210,183 and by year 19, it was $243,004 (JET2, 2013, p. European Sales Forecast).
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 …show more content…
Total Production Costs under the ABC model for the company is $3,992,006 for regular and $2,033,511 for personalized.
These analysis buttresses the fact that CSI’s costing is flawed as the company is not taking advantage of the cost savings it could have from the production of the regular and customized snowboards. For example, factory set up are more than $181,316 for personalized models than the regular ones. This is sensible because it is easier and cheaper to mass produce than to personalize just an item which requires more effort and key adaptations to the production process. Whereas engineering and quality control will be more for customized models, the packaging & Shipping for the regular models will exceed that of the custom models. Over $200,000 is spent in this area and it is affecting CSI’s ability for a strong ROI. The personalized snowboards accounts for 80% of the sales output and only costs $ 66,516 to package and ship. To build a vibrant company with a bright future, CSI should adopt ABC as their accounting costing
Historicity of CSI’s Snowboarding Industry:
Before the bank can approve or decline a facility to CSI, they would need to evaluate the snowboarding industry in the US in particular, and across Europe in general.
From the various literature reviews available, Snowboarding is seen as a marginal sport, which is increasing in popularity especially after the winter Olympics. Chernow (2011) noted that over nine million teen and young adult participate in snowboarding in the US and over the last ten years, these numbers have continued to increase.
As a result of the increasing popularity of the sport, the market potential for snowboarding is also on the increase and CSI is well positioned to harness this growing …show more content…
Looking at the capital budget of CSI, it indicates that the company’s profit potentials for years 15 to 19 will improve significantly with the European expansion. The projected net income from the European operations for years 15-19 are-$44,608, $80,717, $124,357, $164,567 and $192,411 respectively (JET2, 2013, p. Capital Budgeting).
It is interesting to note that net incomes of CSI is increasing at a faster pace than it’s expenses over the projected five-year period. For example, the total selling and administrative expenses increased by a mere $32,821 over 5 years. In year 15 it was $210,183 and by year 19, it was $243,004 (JET2, 2013, p. European Sales Forecast).
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 …show more content…
Total Production Costs under the ABC model for the company is $3,992,006 for regular and $2,033,511 for personalized.
These analysis buttresses the fact that CSI’s costing is flawed as the company is not taking advantage of the cost savings it could have from the production of the regular and customized snowboards. For example, factory set up are more than $181,316 for personalized models than the regular ones. This is sensible because it is easier and cheaper to mass produce than to personalize just an item which requires more effort and key adaptations to the production process. Whereas engineering and quality control will be more for customized models, the packaging & Shipping for the regular models will exceed that of the custom models. Over $200,000 is spent in this area and it is affecting CSI’s ability for a strong ROI. The personalized snowboards accounts for 80% of the sales output and only costs $ 66,516 to package and ship. To build a vibrant company with a bright future, CSI should adopt ABC as their accounting costing