A. Summary Report
A budget is an estimate of revenues and expenditures for a specific period of time. It can, also, include certain financial projections and goals. This financial document serves as guide in assisting in projecting and achieving measurable objectives[->0], performance[->1], and predicting certain foreseeable situations. The purpose of a budget is to improve efficiency, provide direction and assist the company in the planning and the management of its resources.
· Forecasting of sales:
FY 9 sales are projected at 3510 units. Sales for FY8 decreased 15% compared to FY7. Considering the economic situation and the decline in sponsorships for professional riders the projected sales of 3510 units may not be obtainable. There is no indication that sponsorship will increase in the next three years and no alternative revenue streams have been identified to replace the lost sponsorships, these sales projections may not be feasible.
· The lack of a quarterly breakdown prevents the company from forecasting current sales versus prior year sales during the same time period. Also, the seasonality of the sport of cycling is not considered. If the company was able to budget more accurately they would be able to maintain higher levels of needed inventory during the peak periods based upon the seasonal trends.
· Lack of Allowance for doubtful accounts:
The loss of sponsorships combined with the economic decline will eventually lead to an increase in unpaid accounts receivable. In order to project budgetary needs more accurately, an allowance for uncollectable debt should be included in the budget.
· Inventory levels:
Once an order is placed, the company manufactures the requested bicycle. Competition Bikes’ budget includes raw materials and labor to produce 140 additional bikes. However, if new and improved materials are developed the materials the company keeps on hand may become obsolete and therefore depreciating the value of the...