Baldwin Bicycle Case Study

1. The relevant costs are those that occur in the future and differ for each feasible alternative. These relevant costs should be compared to the current situation at Baldwin in order to evaluate the decision to join with Hi-Valu:

Per units cost $83.90
R&D Cost (5000/25000) 0.2
Other variable costs** 18.44
Total $102.54

** 5.5% of assets
Added estimate of monthly inventory cost to balance sheet info to estimate avg assets
2 months materials
(25000 bikes/12 mo x 2 mo inv) x 38.90 $165,847

WIP inv (1000 x 83.90) 83900

Finished Goods (500 x 83.90) 41950
Inc to assets 291697
Current assets 8092000
Assets est 8383697
x.055 461103
divided by 25000 bikes 18.44

2. Cost of capital = 18% 102.54
cost per bike times 25000 bikes 25000
2563500
0.18
461430
divide by 25000 bikes $18.46

3. Product cannibalization refers ot the phenomenon whereby a new product introduced by a firm competes with and reduces sales of the firm's......

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Title: Marketing Analysis
Approximate Word Count: 252
Approximate Pages: 2 (250 words per double-spaced page)

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