This report focuses on some questions closely related with our company’s operation in next quarter. Firstly, according to Mark, currently we need to figure out how much materials we need for next quarter. The second section is to calculate the amounts of materials need to be purchased based on the sales forecast done by John. In third section, we would like to discuss the factors should be considered when doing the sales forecast. Section 3 is to find the breakeven point of the helmets proposal, to help us decide whether to sell helmets. Section 4 is to measure the benefits from producing seat posts by ourselves. In last section, some non-financial factors are considered in deciding whether to accept helmets and seat posts proposal.
In conclusion, through financial analysis on the problems Island Wheels may face in next quarter, some recommendations are provided in above sections. Based on the sales budget and other information available, we figure out thesuggested amount of materials to be purchased. Then, we list the critical external and internal factors to be considered when forecasting sales. Also, to determine whether to accept the proposal of introducing helmets, the breakeven point is calculated. The results of calculations suggest if the sales volume is over 38,400 per year, on financial grounds, Island Wheels should accept this proposal. The last problem is the profitabilityof producing own seat posts. The calculating result showsif USP Steel charges over $80.5 per unit, we can consider producing own seat posts. And the factors which are influential in addition tofinancial factors when deciding whether to produce helmets and seat posts are also listed in above section, such as, the current demand and opportunity cost of producing these products. Hope suggestions in this report will be helpful for our company in the upcoming quarter.
B. Chiappetta,John J. Wild&Ken W. Shaw.2009.Fundamental Accounting Principles.McGraw-Hill
C. B. Nickerson. &E. R. Young.2008. Managerial Cost Accounting and Analysis.The AccountingReview.671-672.
Langfield-Smith, K.H., Thome, H., &Hilton, R.2012.Managerial Accounting: Information for creating and managing value, McGrawHill