Baldwin Bicycle Company Essay

Baldwin Bicycle Company is its own character-by-case bicycle shop that has been in barter for al just about 40 socio-economic classs. Last year Baldwin had sold 98,791 bikes which accounted for nearly $10 billion in sales for 1982. Suzanne Lesiter is the marketing ungodliness President of Baldwin and has just been offered a suggest from Karl Knott, a buyer from Hi-Valu to possibly exposit producing bikes for them. Baldwin had never conducted any business with a chain department such as Hi-Valu since it was use to its own independent retailers. at that place were three curbs that must(prenominal) be met in order for the deal to be make between the two companies. The first condition is that Hi-Valu wants to remove ready access to a large pool of inventory, but didnt want ownership of the bicycles till it reached its stores or would pass the quadruple month deadline of creation held at their regional warehouses.Hi-Valu would then incur 30 days to pay Baldwin. When looki ng at at this new clay of inventory, Baldwin ordain be adding new be that have to deal with the regional warehouses of Hi-Valu. These plus think be include record holding bes of $7,156.38, inventory insurance of $2,146.91, carry property tax of $5,009.46, inventory-handling of $22,066.13, and pilferage of $3,578.13. These relevant costs add up to about $39,957.07. Baldwin must also add other asset costs for the way the inventory system is being run. Baldwin will not stick out to show any sales for at least the first two months considering most of their bikes will be at the regional warehouses.Even after they have been transported to wiz of Hi-Valus stores or have reached the four month deadline, Baldwin still has to wait an excess 30 days for their payment from Hi-Valu. These otiose variable costs include materials for two months at $165,833.33, Work in keep at $34,600, Finished Goods at $34,600, Goods at Hi Valu at $288,333.33, and the pay head of 30 days for the Acco unts Receivable at $192,637.50. As a whole thither are asset related costs of $755,594.57. This outweighs the relevant revenue that is gained from the Challenger serial which makes for high capital investments which seem real risky. The fact that Baldwin must pay spare-time activity on the inventory also adds supererogatory costs which skyrocket the relevant cost up to $1,427,419.15 at the worst case scenario of four months.