Competition Bikes Inc. has retooled and is making both the CarbonLite and the Titanium frame bikes. The company vice president directed that a cost study be conducted, and an activity-based costing analysis was undertaken in one of the company plants. After the study, a breakeven analysis was completed along with target profit projections.
For this task, you will be using the attached “Competition Bikes Inc.” storyline.
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Task:
Note: Be sure to submit a copy of your Excel workbook when submitting your JET2 Task 4 work. The evaluator will need a copy of your data to ensure correct evaluation.
A. Prepare a summary report to the vice president of the company in which you do the following:
1. Recommend whether the company should change its costing method to activity-based costing.
Note: The discussion should include sufficient financial justification for the recommendation made.
2. Based on an evaluation of cost-volume-profit, do the following:
a. Analyze the breakeven point for Competition Bikes Inc. with regard to sales units and sales dollars for both CarbonLite and Titanium bikes.
b. Prepare a summary report that describes the impacts to the breakeven point if company management needed to increase the cost of direct materials by 10% cost increase and needed to add $50,000 in fixed costs to the production facility.
