Professional Documents
Culture Documents
Gary Colbert
ACCT 6260
Gary Colbert
ACCT 6260
Gary Colbert
Exhibit 1
CLIFF JUMPER BICYCLE COMPANY
Balance Sheet, As of December 31, 2008
(thousand of dollars)
Assets
Cash
Accounts payable
$ 520
Accounts receivable
1,360
Accrued expenses
340
Inventories
1,760
Short-term bank loan
2,640
Plant and equipment (net)
4,640
Long-term Notes
payable
2,000
Total liabilities
5,500
Owner's equity
2,600
$8,100
$8,100
CLIFF JUMPER BICYCLE COMPANY
Income Statement, For the Year Ended December 31, 2008
Sales revenues
$10,900
Cost of Goods Sold
8,500
Gross margin
2,400
Selling, General and Administrative (including interest) costs
1,900
Income before taxes
500
Income taxes
200
Net income
$
Exhibit 2
DATA PERTINENT TO HI-VALU PROPOSAL
(Notes taken by Suzanne Leister)
300
ACCT 6260
Gary Colbert
ACCT 6260
Gary Colbert
ACCT 6260
Gary Colbert
CASE QUESTIONS
These are to get your thought processes started. If you are going to
submit this as a case write-up, dont just answer the questions, rather
use an organized case write-up approach.
1. What is the issue facing Leister?
2. What are the pertinent aspects of Cliff Jumper situation?
How would you describe Cliff Jumper's financial situation at the end
of 2008?
How would you describe Cliff Jumper's operating performance for
2008?
How would you describe Cliff Jumper's strategic position at the end
of 2008?
Is the Challenger deal a good strategic fit for Cliff Jumper?
3. Perform a relevant cost analysis of the Challenger deal. Calculate
the annual net profit (revenue less all relevant costs).
What is the "relevant" manufacturing cost for one Challenger bike?
What is the relevant total annual gross profit (relevant revenue less
relevant manufacturing costs) on the deal?
What is the "relevant" annual cost of the working capital
requirement involved
in the Challenger deal? (Note: this is asking for the annual cost of
working
capital financing, not the amount of working capital. We do this to
take account of the
cost to financing these resource requirements over time (i.e., time
value of money)
Should the Challenger deal be charged for the lost sales of bikes
through the
regular distribution channel ("erosion" or "cannibalization" cost)? If
so, what is
the "relevant" erosion charge?
4. What do your recommend Cliff Jumper do? (Relate this to your
overall your
relevant cost analysis).
ACCT 6260
Gary Colbert
Are there other important issues the relevant cost analysis does not
address?
Are there changes to the proposal you would recommend?
How does this deal fit relative to Cliff Jumpers existing business?
Are there other problems or issues at Cliff Jumper that this deal
solves or
accentuates?