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Baldwin Bicycle Company
Transcript of Baldwin Bicycle Company
Identify Quantitative Evaluation
Added Assets and Related Costs
Identify Qualitative Evaluation
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.
Case Facts Continuation
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.
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.
Accept the proposal because of its interesting net added contribution that may yield return to Baldwin Bicycle Company.
Baldwin Bicycle Company
Short Run Alternative Choice of Decision
Select Possible Alternative Decisions
Reject the Proposal / Status Quo
Accept the Proposal
Loss Contribution Margin
Differential Cost Analysis Summary
Objective Of The Case
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.