Jet 2 Task 2 Financial Analysis

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Budgeting A. Budgeting Summary Report 1. Discuss budgetary areas that raise concern in the budget planning a. The first area of concern is the expected number of bikes sold in year 9. The Master Budget expects the company to sell 3510 bikes in year 9. As stated in the Flexible Budget, if the actual number of bikes sold is at 3423, that is a total of 87 less bikes. This translates to $130,065 at the expected sales price of $1495/bike. i. With the numbers of bikes sold in year 8 being 3400, down 600 units from year 7 of 4000, the company must be flexible and understand that sales will not increase so fast from year 8 to year 9; increase of 110 bikes forecasted. b. The company expects the total sales revenue for year 9 to be $5,247,450 with sales of 3510 bikes. With this projection, the company has increased its revenue from the previous year of $5,083,000. This is a total of $164,450. With this increase in sales, the company has improved its sales revenue by 3.2% from year 8. However, as with all business, expected sales does not always go according to plan. Due to increasing costs of operations, the company may think about increasing their price per bike to ensure profits. i. For instance, the company may try to increase the price of the bikes by $55/bike. This slight increase of less than 5% will make a difference Competition Bike’s total revenue. At $55 increase per bike and with the projected sale of 3510 bikes, the company will bring in an additional $193,050. Even with the company only selling 3423 bikes, that is still an increase of $188,265 in revenue for year 9. ii. The added revenue can be used for various aspects of operation costs; the costs of manufacturing utilities and depreciation of raw materials. The company can also spend this money on advertising, commissions, and research and development. Advertising will help the company get their name

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