1. With the release of the new budget for year 9 from Competition Bikes, there are a couple of areas that are a concern that warrant being addressed. The first being the prediction of amount of bikes to be sold; Competition Bikes is expecting 3,510 units to be sold after a year 8 that sold only 3,400 units which was a 15% drop in sales from the year prior (which sold approximately 4,000 units) with zero drop in price point which may make it harder for customers to justify purchasing a bike in the current economy. Understandably, year 8 was in the middle of a recession and the economy could rebound for a productive year 9. However, with only an extra $984 being spent on advertisement, the expectations could fall short unless …show more content…

It would behoove Competition Bikes to create realistic predictions (as stated above). Another idea would to be to examine the sales process. Compare and contrast what strategies were compared between the successful year 7 and the down year 8 to determine if any changes took place in the sales process and development. Competition Bikes should not have been as aggressive as they were following a down year. An improved variance here could also directly affect the Contribution Margin and Operating Income, which both were unfavorable. Advertising Expenses should be increased to the level of year 7. Competition Bikes lowered their budget for advertising but yet ended up spending more anyway. With the economy still in a rut, the chances of hitting a high prediction is slim, especially with low advertising. Since fewer sponsors are using the products from Competition Bikes, it would be wise to advertise to a different market of users (i.e. college students, those who live in traffic congested cities (New York), bike cops, etc). Meanwhile, the transportation unfavorable variance could be fixed by determining what the additional costs were. Since the transportation cost per units is $30, with sales prediction 87 less than projected, that is $2,610 that could have put transportation costs into favorable. The additional costs could be because of rising fuel prices, toll roads, raises for drivers, etc. Many avenues have to be