Please advise with Pros and Cons for each point

1. Costs categorization (Image 1)
   1. Direct Material: All costs attributed to the production of the bikes (Bike parts).
      • Limano parts with shipping and duties
      • CRAM Brake Pads
   2. Direct Labor: Wages of people assembling the bikes.
      • Cost per inspection
   3. Manufacturing Overhead: Costs that support the bike manufacturing, like rent, utilities, and equipment depreciation.
      • Rent on Store
      • Utilities and Electricity
      • Annual depreciation on bike assembly equipment
      • Inventory management costs
      • Customer service and advice
      • Office Telephone and Services
      • Legal and administrative fees
2. Product and period costs (Image 1)
   1. Product Costs
      • Include the costs of manufacturing the bike. For example, direct material and direct labor costs, besides manufacturing overhead costs. Once the bike is built, it will be allocated as inventory until it is sold.
   2. Period Costs
      • General business operation costs like advertising, rent, and wages not related to assembling the bikes.
3. Breakeven (Images 2 & 3)
   1. The breakeven point in units is important to know because it will allow Bottas to know how many bikes he must sell in order to fulfill his total costs and from which point on he will start being profitable.

The formula is the following:

Breakeven Point (in units) = Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

As we can see in image 3, the monthly breakeven point was calculated and the result shows us how many bikes must be sold per product line. Besides, based on the demand, we can see that this breakeven point is completely achievable, which means, that the Botas business will be profitable by far on each product line.

1. Store organization and Emilia partnership (Images 4 & 5)

The recommendation would be to accept Emilia's proposal due to the benefits the partnership comes with, for example:

• New Sells Channel: Due to Emilia's customers would become leads for the Bike store as the people looking for a snack will also get to know the store.
• Side hustle: As seen in image 4, there is plenty of space for Emilia, and by just lending it to her, Bottas will earn 50% of the business.
• Investment: As we can see in images 4 and 5, even though Emilia will not pay us rent and the initial cost of lending her the 25% of the store will be higher than the benefit Bottas gets. But from the 3^rd quarter on, Bottas start to receive more than the rent cost of the 25%. In the beginning, is not for much, but thinking about the future benefits, it becomes a good deal, a nice mid/long-term investment.
• Client experience: Synergy between the coffee shop and bike shop, creating a unique experience for customers.
• Brand: Wider reach and potential for brand exposure.

1. Provider decision (Image 6)

The recommendation here is to buy the brake pads from CRAM as with this provider the cost per pedal is shipper and also, as they are local providers, the shipping costs and time, are lower.

1. Sells and costs per bike type (Images 7, 8 & 9)

The calculation of the sales and costs was done having in mind that the units sold are the same as the demand for each bike. This means that the variable costs and sales were multiplied by the monthly demand and in this way, the profitability was calculated.

This result shows us that the shop would be very profitable by just selling bikes and not including the bike repair services and Emilia's investment.

1. Recommendation to update records

• Track all financial transactions: Everything must be registered, including materials purchase, assembly cost, revenue, and overhead expenses.
• Review and reconcile accounts
• Chart of accounts

1. Most common account journals
   1. Purchasing Raw Material
      • Debit: Raw materials inventory
      • Credit: Cash
   2. Assembling bikes
      • Debit: Work in progress inventory
      • Credit: Raw material inventory
   3. Transferring finished bikes to finished goods inventory
      • Debit: Finished good inventory
      • Credit: Work in progress inventory
   4. Selling Bikes
      • Debit: Cash
      • Credit: Sales Revenue
   5. Recognizing cost of Goods Sold for Sold Bikes
      • Debit: Cost of goods sold
      • Credit: Finished goods inventory

Annex

• Image 1

• Image 2

• Image 3

• Image 4

• Image 5

4:48 all 5G+ 49