This exercise asks you to build a Profit and Loss Statement for Colorado Ricardo Mountain Bikes.
The Scenario: Colorado Ricardo Mountain Bikes
Colorado Ricardo Mountain Bikes was founded by Ricardo Francisco, a keen off-road cyclist who grew frustrated with bikes breaking down under the strain of the Colorado mountains. After years of trial and error, he built a bike tough enough to survive the terrain and named it the “Colorado Ricardo”. Word spread quickly among local riders, and Ricardo gave up his day job to build and sell bikes full-time from a small workshop outside Denver.
This year, Colorado Ricardo sold 4,000 bikes at $1,200 each, down from a peak of around 10,000 bikes a year. Each bike costs $700 to build (materials, direct labour and variable overhead), and the business carries $1,800,000 a year in fixed costs (factory rent, salaries and admin). At the year end, Colorado Ricardo held $500,000 in cash, $700,000 in inventory and $300,000 in trade receivables, against $500,000 owed to suppliers, a $300,000 short-term loan and a $1,200,000 long-term loan.
Once you have drafted your own answer, compare it with Marketing Teacher’s suggested answer.
