Competition Bikes Budgeting and Variance Analysis Report
Western Governor’s University

Competition Bikes Budgeting and Variance Analysis Report Competition Bikes, Incorporated (Inc.) makes bicycles for professional and other highly accomplished riders who compete in bike races, biathlons, and triathlons. Approximately sixty percent of all race winners have been victorious using bicycles designed by Competitions Bikes, Inc. This extraordinary success rate is a topic of conversation among racers and has led to exponential success for founder Larry Ferguson who formed the company in 2001 in his garage. Competition Bikes is known for quality products and is leader in the market with the CarbonLite …show more content…

Then variances can be produced based on differences between the plan and actual results. The development and use of a flexible budget may be a more effective strategy for future budget forecasting. Why? Variant analysis compares the flexible budget to actual results or the master budget to clarify the impact of company operations. Basically, the standard output is compared against the actually output and favorable variances and unfavorable variances are identified. A favorable variance identifies an outcome that is successful. An unfavorable variance demonstrates a short coming. Performing a variance analysis will enable management to remove inefficiencies, address concerns, increase performance, and hopefully increase revenue.
Competition Bikes Variance Analysis A variance analysis has been conducted on standard output figures compared against actual output figures of the Budgeted Contribution Margin Income Statement for Competition Bikes. The following variances have been identified. First, a comparison of Net Sales identifies an unfavorable variance due to an actual output of 3400 units rather than a forecasted output of 3510 which is a sales decrease of net sales amount by $164,450. This identifies poor forecasting of net sales and impacts the overall financial position of the company including revenue and cash flow. The variable costs including: direct materials, direct labor, manufacturing overhead, variable selling expenses indicated a