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Baldwin Bicycle Company
224
Transcript
Case Facts
Identify Quantitative Evaluation
Added Profit:
- Exist for almost 40 years. Sales were made through independent stores and bicycle shops.
- Suzanne Leister, marketing vice-president was approached by Mr. Knott Hi-Valu’s buyer of sporting goods about the possibility of supplying bicycles.
Hi-Valu’s requirements if proposal will be accepted:
- Hi-Valu must have a ready access to a large inventory of bicycles due to unpredictable volume of sales.
- Hi-Valu wanted to purchase the bicycles from Baldwin at a lower prices compared from the wholesale prices of the same bikes sold in the usual markets
- Hi-Valu wanted the challenger bike to be somewhat different in appearance from Baldwin’s other bikes.
Loss Contribution Margin
REACH DECISION
Case Facts Continuation
Identify Quantitative Evaluation
Added Assets and Related Costs
- If agreement could be reached on prices, Hi-Valu would sign an exclusive contract with Baldwin for three years. The contract is renewable unless either of the party express his will to discontinue.
Objective Of The Case
Differential Cost Analysis Summary
Accept the proposal because of its interesting net added contribution that may yield return to Baldwin Bicycle Company.
SIDE B
SIDE A
- To come up with a short-run alternative choice of decisions.
- To analyze the cost behavior and its impact.
- To apply differential cost accounting in selecting a good choice
Limitation and Constraints:
- All variable cost are differential and primarily used in the decision analysis.
Define the Problem
The proposal of Hi-Valu will increase Baldwin’s sales volume however this will result to a higher purchasing, carrying and production cost that has a direct effect to it’s profitability.
Identify Qualitative Evaluation
Select Possible Alternative Decisions
- Reject the Proposal / Status Quo
- Accept the Proposal
Baldwin Bicycle Company
THANK YOU!
Short Run Alternative Choice of Decision
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