Resort Bicycle Rental

Resort Bicycle Rental

Excel Learning Aid Page 87MGS 3040-03

GROUP CJustin Bornstein Dagmara GalikSvitlana Panasik Ulascan Senger

Inventory Formulas in Use

Using Excel for Inventory

• These formulas are used to analyze the Resort Bicycle Rentals. – Cost of Current Inventory=Bike Cost x Number on

Hand– Revenue per Bike=Total Rental Revenue/Number

on Hand– Revenue as a Percent of Cost of Inventory=Total

Rental Revenue/Cost of Current Inventory

Other Formulas • Value of Inventory= Sum of the Cost of Current Inventory • Average aggregate inventory value = # of units on hand x total value of

units– The average aggregate inventory value is the total value of all items

held in inventory by a firm.• Inventory turnover = # of Rentals / inventory on hand

– To improve inventory turns, managers should look at popularity of their bikes; which bicycle is being rented the least and the most often

• Total value tells managers how much firm’s assets are tied up in inventory.

• Total business revenue= Sum of the Total Rental Revenue of each bike• Net Income= Total Business Revenue- Average Aggregate Inventory• Current Return on Asset= Net Income / Average aggregate Inventory

Showing New Calculations

Make of Bike Bike CostNumber on Hand

Cost of Current

Inventory

Number of

Rentals

Total Rental

RevenueRevenue per Bike

Revenue as percent of

Cost of Inventroy

Inventory Turnover

Wonder Bike $325 12 $3,900 85 $6,375 $531 163.5% 7.1Wonder Bike II $385 4 $1,540 34 $4,570 $1,143 296.8% 8.5Wonder Bike Surpreme $475 8 $3,800 44 $5,200 $650 136.8% 5.5LiteLift Pro $655 8 $5,240 25 $2,480 $310 47.3% 3.1LiteLift Laders $655 4 $2,620 40 $6,710 $1,678 256.1% 10.0LiteLift Racer $795 3 $2,385 37 $5,900 $1,967 247.4% 12.3

Resort Bicycle RentalBicycle Inventory Valuation

Tuesday, February 9, 2010

Managerial Critical Thinking

Critical Thinking and Decision Making for Resort Rental Bicycle

• Effective decision makers are those the rare individuals who are able to consistently identify and choose the best option among multiple alternatives and the provided data.

• Looking at the new data for Resort Rental Bicycle business, removing the LiteLift Pro branded bike will increase the overall revenue and save costs in total inventory.

Make of Bike Bike Cost

Number on Hand

Cost of Current Inventor

y

Number of

Rentals

Total Rental

RevenueRevenue per Bike

Revenue as

percent of Cost of Inventro

y

Average Aggregat

e Inventor

y

Total Business Revenue

Net Income

Current Return

on AssetsWonder Bike $325 12 $3,900 85 $6,375 $531 163.5%

Wonder Bike II $385 4 $1,540 34 $4,570 $1,143 296.8%

Wonder Bike Surpreme$475 8 $3,800 44 $5,200 $650 136.8%

LiteLift Pro $655 8 $5,240 25 $2,480 $310 47.3%

LiteLift Laders $655 4 $2,620 40 $6,710 $1,678 256.1%

LiteLift Racer $795 3 $2,385 37 $5,900 $1,967 247.4%$19,485 $31,235 $11,750 60.3%$14,245 $28,755 $14,510 101.9%

Resort Bicycle RentalBicycle Inventory Valuation

Tuesday, February 9, 2010

Manager’s Decisions

Decisions and conclusions that may be drawn from the data:• LiteLift Pro bike should be discontinued from the rental• Revenue not high enough to cover costs and make profits

• Should invest in buying bikes that generate higher revenues: Wonder Bike II, LiteLift Laders and LiteLift Racer

• Decision whether the aggregate value is too low or too high by historical or industry comparisons or by managerial judgment

• Reducing aggregate inventory investment will increase ROA. • Objective: to have the proper amount of inventory not the least

amount of inventory