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SHELMA BIKES STORE. SHELMA Bikes Store will be located in downtown Vancouver near the Seawall, which surrounds Stanley Park. It will provide sales and repair

SHELMA BIKES STORE.

SHELMA Bikes Store will be located in downtown Vancouver near the Seawall, which surrounds Stanley Park. It will provide sales and repair services, as well as personalized advice, attention to detail and exceptional customer service. SHELMA, the owner, has savings of $9,000, will take courses on bicycle maintenance and will attend cycling commercial shows at $15,000.

SHELMA needs to manage costs effectively, analyze his product lines, and make informed decisions based on following reliable cost accounting information.

  • 30% are indirect costs, and 70% are direct costs.
  • Classify direct material and Classify direct labor.
  • Classify manufacturing overhead costs.
  • SHELMA has concerns about the differences between product and period costs.
  • Lewis, SHELMAs friend, mentions that overhead is allocated based on direct labour hours.
  • How many bicycles at the breakeven point to consider sales. (Given the revenue surcharge and outstanding costs).
  • Devoting 7 hours a week to mechanics will earn between $60 and $100 per hour plus parts.
  • Commercial store with 2226 square feet at $60 each. Space 50% repairs and 50% sales floor.
  • Limano spare parts supplier , (offers brake pads for $50) you will buy wholesale spare parts with which you will assemble the bicycles and customize and sell them with a 65% margin on your total cost, on the other hand the CRAM supplier , ( offers $40 brake pads), Each bike requires 2 pads. LIMANO: 102 years of experience, operation in Sri Lanka, 3 to 6 weeks of waiting to receive parts, they are reliable and offer discounts. CRAM manufactures locally, and threatens to migrate to Latin America. Choose one of them between Limano or CRAM. Why?
  • Emily offers to split her profits equally (50%) by subletting 25% of the total space for a cafeteria, where she can generate $2,000 in sales revenue per month with a constant cost of sales of 25% of revenue. He expects to double every quarter for the first year, spending $1,500 a month on advertising. Besides Offering Emilia to be a partner, she does not know the amount to invest. Should SHELMA consider Emily's proposals?, Why?
  • SHELMA should pay $175,000 for advertising, if he does not accept Emilia's support, in addition to creating a new website, and paying $70,000 to 8 influencers .
  • SHELMA must decide whether to incorporate his operations or continue operating alone.
  • Prepare a comprehensive and mobile budget. For the next 12 months, (July 1 to June 30 ), which includes all the costs and detailed elements.
  • Sales will be steady, but will increase 15% in May and steadily in the summer months. All other costs are expected to remain relatively constant each month.
  • Please, make a recommendation about.
    • How to evaluate each of the types of bicycle?
    • How to compare the actual results with the budgeted ones?
    • Detailed instructions for keeping records up to date?
    • How to account for your business?
    • What journal entries will you routinely see when receiving raw materials? From Assemble, store, and sell bikes.
  • Consider pros and cons of each action.

Consider the next numbers.

  • LIMANO Annual contract cost of $25,000
  • SHELMA Work Time Average 45 hours per week
  • Inventory management costs $70,000
  • Customer service and advice $35,000
  • Telephone Office and Services $100 per month
  • Legal and administrative fees $3,000 per month
  • rent in-store $60 per square foot.
  • Utilities and electricity $1,800 per month
  • Annual depreciation of bicycle assembly equipment $115,000

Types of bicycles.

Considering for Mountain bike.

  • Demand 10,000
  • Work time. 3.5 hours.
  • Limano Spare parts with shipping and tariffs $450
  • Inspection Time 1.5 hours
  • Cost per Inspection $100

Considering for Road bike.

  • Demand 5,000
  • Work time. 4.5 hours.
  • Limano Spare parts with shipping and tariffs $675
  • Inspection Time 2.0 hours
  • Cost per Inspection $100

Considering for Tandem bicycle.

  • Demand 2,000
  • Work time. 6 hours.
  • Limano Spare parts with shipping and tariffs $730
  • Inspection Time 2.5 hours
  • Cost per Inspection $100

PLEASE RESOLVE WITH EXERCISES AND DETAIL CONSIDERING ALL DATA.

  • Classify direct material and Classify direct labor.
  • Classify manufacturing overhead costs.
  • SHELMA has concerns about the differences between product and period costs.
  • How many bicycles at the breakeven point to consider sales. (Given the revenue surcharge and outstanding costs).
  • Choose one of them between Limano or CRAM Suppliers. And Why?
  • Should SHELMA consider Emily's proposals?, Why?
  • SHELMA must decide whether to incorporate his operations or continue operating alone.
  • Prepare a comprehensive and mobile budget. For the next 12 months, (July 1 to June 30 ), which includes all the costs and detailed elements.
  • Please, make a recommendation about.
    • How to evaluate each of the types of bicycle?
    • How to compare the actual results with the budgeted ones?
    • Detailed instructions for keeping records up to date?
    • How to account for your business?
    • What journal entries will you routinely see when receiving raw materials? From Assemble, store, and sell bikes.
  • Consider pros and cons of each action.

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