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  • Case - II Baldwin Bicycle Case: Submitted by Group - 6

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    sonatukun
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    This document summarizes the profitability and costs associated with producing 25,000 Baldwin bicycles. It finds that under variable costs, the profit per unit is $23.09 with a total incremental contribution of $577,250. When considering full costs in the first year, the profit per unit is $8.34. The total working capital needed is $735,510.96 and additional asset-related costs bring the total investment to $767,311.76. The return on this incremental investment is calculated to be 75.2%.

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    Baldwin 1

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    This document summarizes the profitability and costs associated with producing 25,000 Baldwin bicycles. It finds that under variable costs, the profit per unit is $23.09 with a total incremental contribution of $577,250. When considering full costs in the first year, the profit per unit is $8.34. The total working capital needed is $735,510.96 and additional asset-related costs bring the total investment to $767,311.76. The return on this incremental investment is calculated to be 75.2%.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
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    78 views5 pages

    Case - II Baldwin Bicycle Case: Submitted by Group - 6

    Uploaded by

    sonatukun
    This document summarizes the profitability and costs associated with producing 25,000 Baldwin bicycles. It finds that under variable costs, the profit per unit is $23.09 with a total incremental contribution of $577,250. When considering full costs in the first year, the profit per unit is $8.34. The total working capital needed is $735,510.96 and additional asset-related costs bring the total investment to $767,311.76. The return on this incremental investment is calculated to be 75.2%.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 5

    Case – II

    Baldwin Bicycle case


    Submitted by
    Group - 6
    Profitability under variable and full
    cost
    Amounts in dollar (per unit)
    Direct material 39.80
    Direct labor 19.60
    Mfg overhead (variable part) 09.80
    Total variable cost 69.20
    Selling price 92.29
    Profitability 23.09
    Incremental contribution (25000 units) 577250
    For100,000 units
    Full cost in the first year 8395000
    Selling price 9229000
    Profitability (per unit) 8.34
    Calculation for working capital
    Particulars For 25000 units Amounts in dollar
    Direct material 4166 * 39.80 165806.80
    WIP 1000 * (39.8+19.6/2+9.8/2) 54500
    Finished goods 500 * 69.2 34600
    Accounts receivables 92.29 * 25000/12 192270.83
    Inventory ( Before Hi-value 25000/6 * 69.20 288333.33
    taking the title)
    Total 735510.96
    Asset related cost
    Particulars Amount in dollar

    Record keeping for inventory and 7355


    receivables

    Inventory insurance 1629.72

    State inventory tax 3802.68

    Inventory handling cost 16297.20

    Inventory pilferage,breakage etc 2716.2

    Total 31800.80

    Total investment required 767311.76


    (including working capital)
    Calculation for ROI
    Particulars Amount in dollar
    Incremental revenue 577250
    Incremental investment 767311.76
    (735510.96+31800.80)
    ROI 75.2%

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