Paraphrasing Tool | X w Wordtune | Your th X Unit: ACCG3030 Stix Microsoft Word - 2 x * Assessed Coursewc > *Course Hero Assessed Coursewc X *Course Hero X C 1. Read The Case "I X f (1) Facebook X C content.ilearn.mq.edu.au/33/72/3372fa581e2685750a1bc13bc2c805c9806a4b73?response-content-disposition=inline%3Bfilename%3D"Weekly%20tutorial%20assignment%20questions.pdf"&response-content-type=application%2Fpdf&Expires=164... Q Update E Microsoft Word - 2022-tutorial questions 5 / 28 86% + Week 3 Assignment EXHIBIT 1: FINANCIAL STATEMENTS ($000s) STRATEGIC PROCESS AND STRATEGIC ANALYSIS Balance Sheet (as of December 31, 1982) 1. Read the case "Baldwin Company" and answer the questions given at the end of the case. Liabilities and Owners Equity $ 342 Accounts payable $ 512 Accounts receivable 1,359 Accrued expenses 340 BALDWIN BICYCLE COMPANY Inventories 2,756 Short-term bank loans 2,626 Plant and equipment (net) 3.635 Long-term Note payable 1.512 4.990 In May 1983, Suzanne Leister, marketing director of Baldwin Bicycle Company, was mulling over the discussion she had had the previous day with Karl Knott, a buyer from Hi-Valu Stores. Hi-Valu operated a Shareholders' equity Total assets $ 8.092Total liabilities : 8.092 chain of discount department stores in the North West. Hi-Valu's sales volume had grown to the extent that it was beginning to add its "own-brand" (also called "private-label") merchandise to the product lines of several of its departments. Mr. Knott, Hi-Valu's buyer for sporting goods, had approached Ms. Leister about Income Statement ($'000) (for the Year Ended December 31, 1982) the possibility of Baldwin producing bicycles for Hi-Valu under its own-brand name of "Challenger". Sales revenues ... ...$ 10,872 Cost of Goods Sold ...8.045 Baldwin had been making bicycles for almost 40 years. In 1983, the company's line included 10 models, Gross margin . 2,827 ranging from a small beginner's model with training wheels to a deluxe 12 speed adult's model. Sales were currently at an annual rate of about $10 million and Baldwin's 1982 financial statements appear in Exhibit 1. Selling and Administrative expenses 2.354 Income before taxes .. ......473 Most of Baldwin's sales were through speciality bicycle shops. Baldwin had never before distributed its products through department store chains of any type (e.g. Rebel Sports, K-Mart etc). Ms. Leister felt that Income tax expense . ..218 Baldwin bicycles had the image of being above average in quality and price, but not a "top of the line" Net income .. $ 255 product. EXHIBIT 2 Hi-Valu's proposal to Baldwin had features that made it quite different from Baldwin's normal way of doing DATA PERTINENT TO HI-VALU PROPOSAL business. First, Hi-Valu wanted to sell its Challenger bicycles at lower prices than the well-known brand- (Notes taken by Suzanne Leister) name bicycles it carried (e.g. Trek), and yet still earn approximately the same dollar gross margin on each bicycle sold - the rationale being that Estimated costs of producing a Challenger bicycle (average unit cost, assuming a constant mix of name bikes. Thus, Hi-Valu wanted to purchase bikes from Baldwin at lower prices than the wholesale prices models): of comparable bikes sold to Baldwin's speciality bicycle shops. Materials $39.80 * Labour 19.60 Second, Hi-Valu wanted the Challenger bike to be somewhat different in appearance from Baldwin's other Overhead (@ 125% of labour) 24.50* bikes. While the frame and mechanical components could be the same as used on current Baldwin models, $83.90 the mud-guards, seats, and handlebars would need to be somewhat different, and the tyres would have to Includes items specific to models for Hi-Valu, not used in our standard models. have the name "Challenger" molded onto them. Also, the bicycles would have to be packed in boxes printed * Accountant says about 40% of total overhead cost is variable; 125% of DLS rate is based on volume of 100,000 with the Hi-Valu and Challenger names. These requirements were expected by Ms. Leister to increase bicycles per year. From this information, fixed manufacturing overhead can be calculated at about $1.5m per year. Baldwin's purchasing, inventorying, and production costs over and above the added costs that would be incurred for a comparable increase in volume for Baldwin's regular products. One-time added costs of preparing drawings and arranging sources for mud-guards, seats handlebars, tyres, and shipping boxes that differ from those used in our standard models: ap $5,000. On the positive side, Ms. Leister was acutely aware that the "bicycle boom" had flattened out, and this plus a poor economy had caused Baldwin's sales volume to fall in the past two years. As a result, Baldwin currently was operating its plant at about 75% of a one-shift capacity. Thus, the added volume from 3. Unit price and annual volume: Hi-Valu estimates it will need 25,000 bikes a year and proposes to pay Baldwin (based on the assumed mix of models) an average of $92.29 per bike for the first year. Knott Hi-Valu's purchases could possibly be very attractive. If agreement could be reached on prices, Hi-Valu ndicated that there was very little, if any, negotiating leeway in the $92.29 proposed initial price. would sign a contract guaranteeing to Baldwin that Hi-Valu would buy its own-brand bicycles only from Baldwin for a three-year period. The contract would then be automatically extended on a year-to-year basis, Impact on our regular sales unless one party gave the other at least three months notice that it did not wish to extend the contract. Some customers compare bikes from shop to shop, and many of them are likely to recognize a Challenger bike as good value when compared with a similar bike (either ours or a competitor's) at a higher price in a Suzanne Leister realized she needed to do some preliminary financial analysis of this proposal before having specialist bicycle shop. In 1982, we sold 98,791 bikes. My best guess is that our sales over the next three any further discussions with Karl Knott. She had written on a pad the information she had gathered to use in years will be about 100,000 bikes a year if we forego the Hi-Valu deal. If we accept it, I think we'll lose about her initial analysis; this information is shown in Exhibit 2. 3,000 units of our regular sales volume a year, since our retail distribution is quite strong in Hi Valu's market regions. These estimates do not include the possibility that a few of our current dealers might drop our product line if they find out we're making bikes for Hi-Valu. Adapted from Shank, J. (2001) Cases in Cost Management: A Strategic Emphasis.pp.21-24 (South- Western). The American bicycle industry is very volatile. From 1967 to 1970 sales average about 7 million units a year; in 1973 sales were 15 million units; in 1975 sales were back down to 7.5 million units and in 1982 sales were 10 million units. Type here to search O .am N 9 V 22 C ~ 9 12 () ENG 11:55 PM 6/03/2022