Baldwin Bicycle Company

Group 8 12P194 Chandrachuda 12P229 Santosh Garbham 12P206 Kartik Maheswari 12P208 Kawaljeet Singh

Added inventory costs Work In process 1000 bikes 41950.333 .000 Finished goods 500 bikes 41950.000 Materials 2 months of Materials 165833.

Asset Related Costs Receivables for 5 months =92.792 24348.833 1498.obsolescence.FinishedGoods.333 Inventory =WIP.damage 5494.000 Pilferage.400 1748.133 .333 Asset Related costs Pretax cost of funds Record Keeping Costs Inventory Insurance State Property tax on inventory Inventory handling labor and equipment 140005.Materials 249733.9*25000/12*5 967708.133 14984.

43454 15 43.5M/100000) Product Cannibalization Cost/bike Product Cannibalization Cost Approximating it to loss of 3500 (3000+Loss due to loss of dealer) 10872000 8045000 98791 110.0505 81.61597 152655.Product Cannibalization Sales Revenue (from Exhibit 1) Cost of Goods sold No of bikes sold in the previous year Selling Price(Sales Revenue/BikesSold) Cost Price of each bike Fixed Cost(1.9 .

000 245000.824 2322500.000 490000.824 Income Tax PAT 113511.000 490000.824 2322500.885 995000.292 152655.000 188079.005 115811.000 245000.000 251764.000 490000.005 115811.885 995000.819 135953.000 188079.819 135953.000 251764.885 Additional Revenues from 25000 bikes Profit Before Tax 2322500.000 0.000 0.292 152655.000 5000.000 245000.005 .Profits for 3 years Material Costs Labor Costs Overhead(Variable) One Time Costs Asset Related Costs Product Cannibalization 995000.000 188079.292 152655.819 133253.000 246764.

if contract terminates. then Baldwin bikes would have lost some ground to challenger bikes Our distribution network will suffer Full Capacity utilization Entry into Different Markets Additional Profits .Risks and Rewards With Hi Value Risks Product Cannibalization Rewards 3 Years of additonal 25000 bikes Revenues After 3 years.

Risks and Rewards Without Hivalue Risks Rewards Unutilized Capacity No need for initial set up costs Less profits Our own distributors remain intact Risk of competition from Hivalue No produt Cannabiliztion .

ROA.ROS ROS = 0.03 ROA= 0.31 .ROE.

What should Mr Leister do? Why? – He should enter into contract with Hi-value. close relationship with HI-Value Market chain will give us huge benefit. Although we may lose one or two dealers. – More over we have immediate additional revenues. which we can use for expansion activities . With this we may also change our product perception from low quality to high quality products.

Sign up to vote on this title
UsefulNot useful