Task 2 Budget Planning
Katie Ebert
JET2 Task 2
#000276281
There are a few areas of concern when looking over Competition Bike’s budget for the upcoming year (Year 9). This budget estimates that 3,510 units will be sold. CB has just experienced a 15 % decline in sales, due to the economic situation. In year 8, CB sold 3,400 units. This flexible budget is allowing 110 more units be added into the mix. Although sales trends have remained consistent, despite the decline in sales from professional riders, it might be wise to not aim as high to make sure the recovery actually does occur. The sales forecast predicts that CB will recover over the next 3 years. CB estimates over $100,000 more in cash and cash equivalents for year 9. This is, of course due to the increase in unit sales that is worked into the budget. It might be a better idea to underestimate rather than overestimate when it comes to cash on hand.
Retaining a quality labor force has never been a problem for CB. I feel it raises some concern when the budget does not allow for any wiggle room with the labor hours. This would be an area in the budget that would make sense to allot some extra time/money. CB would be wise to be sure each unit is manufactured properly, with absolutely no mistakes after coming off a sales year which yielded less than ideal results. If riders do actually decide to continue buying CarbonLite bikes, CB must be extremely confident in the units they are selling. Even allowing for an extra hour per unit would help to cushion this part of the flexible budget.
In the selling, general and administrative budget for year 9 there are a few areas of concern. The advertising budget is 2% of the projected Gross Margin. CB should increase their advertising budget. Coming up with a new phrase or slogan will help CB stand out in the consumer’s mind. Especially after the economic decline in year 8, CB will want to make sure that their customers know they are still here and better than ever.
The
JET2 Task 2
#000276281
There are a few areas of concern when looking over Competition Bike’s budget for the upcoming year (Year 9). This budget estimates that 3,510 units will be sold. CB has just experienced a 15 % decline in sales, due to the economic situation. In year 8, CB sold 3,400 units. This flexible budget is allowing 110 more units be added into the mix. Although sales trends have remained consistent, despite the decline in sales from professional riders, it might be wise to not aim as high to make sure the recovery actually does occur. The sales forecast predicts that CB will recover over the next 3 years. CB estimates over $100,000 more in cash and cash equivalents for year 9. This is, of course due to the increase in unit sales that is worked into the budget. It might be a better idea to underestimate rather than overestimate when it comes to cash on hand.
Retaining a quality labor force has never been a problem for CB. I feel it raises some concern when the budget does not allow for any wiggle room with the labor hours. This would be an area in the budget that would make sense to allot some extra time/money. CB would be wise to be sure each unit is manufactured properly, with absolutely no mistakes after coming off a sales year which yielded less than ideal results. If riders do actually decide to continue buying CarbonLite bikes, CB must be extremely confident in the units they are selling. Even allowing for an extra hour per unit would help to cushion this part of the flexible budget.
In the selling, general and administrative budget for year 9 there are a few areas of concern. The advertising budget is 2% of the projected Gross Margin. CB should increase their advertising budget. Coming up with a new phrase or slogan will help CB stand out in the consumer’s mind. Especially after the economic decline in year 8, CB will want to make sure that their customers know they are still here and better than ever.
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