Task - 2

Financial Analysis: Task # 2

Introduction

The purpose of the budget is to summarize and incorporates the entire budget of the organization. It helps in determining the current position of the company and what company wants to achieve and what strategies will be suitable for achieving those goals. For this, we will analyze Competition Bikes, Inc. Flexible Budget comparing the projections in the master budget with the actual results after the end of the year.

Discussion

Budgetary Areas

The Competition Bikes, Inc budgetary areas that raise concern in the budget planning for 9 year is quite interesting through which once can highlights the areas where company information is lacking with respect of content and presentation.

There were few budgetary areas that raise concern in the budget planning which are as followed:

Quarterly Activities: Quarterly activities are the area of concern since the budget has not been divided by quarters and these are very important for companies that are producing automobiles such as sport vehicles. This product- bicycle is usually practice outdoors and hence they are dependent on the weather. From this, we can estimate that the demand fluctuate with the seasons. Furthermore, as the trend of bicycling increase with seasons, it is important to make a Quarterly schedule where production and sales are major items. Lacking this will create problem for company as company production will be high and sales will not be inclined with it.

Even professional bicycling and their competitions and normal bicycling by public increases in Good weather while reduces during worst weather. This requires separate Quarterly activities in order to see the peak season and the low seasons so that further improvement can be made in bicycle previous year or quarter trend. Beside this, other budgetary concern is the purchase of inventory which is high during peak demand. If they would not consider this area of concern, company would be piling up huge amount of inventory in their warehouses. Considering this factor will leads company to purchase high inventory in the high seasons so that they can meet the demand of the customers and hence, seasonal inventory purchase will save company to pile up the material which might becomes outdated in the next seasons. This will also facilitate the company in utilization of their inventories kept in reverse in order to increase their sales (Bowhill, 2011).

Sales Projections: For Sales Projection, the budgetary area concern for Competition Bikes, Inc is that the projection has been based on the most recent economic situation of the country, looking at their competitors' trend and overall demand for their brand in automobile industry. This was done to obtain the accurate demand, purchasing power and taste of the people, as sales has direct linkage with the purchasing power of the bicycle. As Competition Bikes has experienced 15% reduction in their sales in 2008 which was due to the riders that were sponsored and many of the sponsors have cut back on the funding levels to their riders and this has resulted in the decline of CarbonLite ...