Baldwin Bicycle Company: Management Accounting Essay

Entre ma Salle School

Coll School of Business and Economics

Ramon V. Del Rosario Sr. Graduate School of Business

Case Paper


Baldwin Bi-cycle Company

Published in incomplete fulfillment

Pertaining to the requirements in

Management Accounting (ACC510M)

AY 2010-2011, third Trimester

Submitted to:

Teacher Jolly N. Cruz

Submitted by:

Showing Group your five

Kelvin L. Go

Elmer V. Dela ut Cruz

Joshua G. Soriano

Jeffrey Capital t. Tabangcura

Kristian Jewel G. TaiГ±o

Elegance Taguinod

dua puluh enam February 2011


Baldwin Bi-cycle Company (BBC) is a mid-range full-line bi-cycle manufacturing business with 45 years' knowledge. BBC produced 98, 791 units accounting for over $10MM in profits in 1982, with an expected 100, 1000 units for three years. Distributed exclusively through independently-owned retailers and niche bicycle shops, BBC bikes are known for their particular above-average quality. In May 1983, a rapidly-growing Northwestern discount retail chain, Hi-Valu, approached Suzanne Leister, VP Marketing, and suggested a private-label agreement.

Beneath this new program, BBC will manufacture the Challengerв„ў type of bicycles solely for Hi-Valu. The Challenger line was going to be a cheap value bi-cycle, sold at full prices underneath BBC's typical product lines. This would result in expected cannibalization of the estimated a few, 000 models but incremental sales of 25, 500 units.

The terms of this proposal, nevertheless , deviate from standard practice. Hi-Valu insists that the bikes be purcahased by them in a price less than BBC's typical distributor prices to preserve Hi-Valu's margins. Even more, bicycles would be shipped to Hi-Valu's regional warehouses upon consignment and paid only when 120 days and nights had passed or the bi-cycle was shipped to a Hi-Valu store, no matter which occurred initially. Payment could then always be Net 30 days.

Relevant expense analysis says the Opposition deal could be a lucrative method to obtain incremental earnings, since the twenty-five, 000 added units could possibly be produced during plant slack time; nevertheless , as a lower price value collection, the Opposition program would not align strategically with BBC's best-cost service provider strategy. Additional, the initial capital outlay of $787, 000 for the project surpasses BBC's available resources.


Affirmation of the Problem

в–Є Should certainly BBC agree to Hi-Valu's present?

Objectives of the watch case

в–Є To find techniques on how to obstruct decreasing product sales volume of BBC without limiting the way it will business

▪ To find ways on how to continue producing existing product line – may not be the complete model although at least bearing the make and image of BASSE CONSOMMATION bicycles (not top of the line although above average in quality and price)

Assumptive Framework: Chapter 26 Short-Run Alternative Decision Decisions

В§ Alternative Decision Problem

в–Є Two or more alternate choices of actions are specified, and the director chooses the one which he or she feels to be the greatest

o Taking the proposal of Hi-Valu or rejecting it and simply continue with existing business

В§ Opportunity Price

в–Є A measure of the value that is shed or lost when the range of one alternative requires stopping an alternative course of action

u If Hi-Valu's proposal is definitely accepted, this may mean that LABELLISE BASSE CONSOMMATION will have to stick to the product requirements and products on hand requirements of Hi-Valu – some existing materials utilized for BBC bikes (specifically intended for the fender, seat, handlebar, tire and packaging) won't be used

В§ Sunk expense

в–Є Expense that has already been incurred and thus cannot be changed by any decision getting considered

um The cost of the machines to be used to associated with materials or assemble all of them has already been received whether or not LABELLISE BASSE CONSOMMATION accepts Hi-Valu's proposal.

Areas for Account

в–Є Hi-Valu would keep the units about consignment in its own facilities and withhold...

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