Resort Bicycle Rental
Excel Learning Aid Page 87
MGS 3040-03
GROUP C
Justin Bornstein Dagmara Galik
Svitlana 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
Resort Bicycle Rental
Bicycle Inventory Valuation
Tuesday, February 9, 2010
Revenue as
Cost of Number Total
percent of
Number Current
of
Rental Revenue
Cost of
Inventory
Make of Bike
Bike Cost on Hand Inventory Rentals Revenue per Bike Inventroy Turnover
Wonder Bike
$325
12
$3,900
85
$6,375
$531
163.5%
7.1
Wonder Bike II
$385
4
$1,540
34
$4,570
$1,143
296.8%
8.5
Wonder Bike Surpreme
$475
8
$3,800
44
$5,200
$650
136.8%
5.5
LiteLift Pro
$655
8
$5,240
25
$2,480
$310
47.3%
3.1
LiteLift Laders
$655
4
$2,620
40
$6,710
$1,678
256.1%
10.0
LiteLift Racer
$795
3
$2,385
37
$5,900
$1,967
247.4%
12.3
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.
Resort Bicycle Rental
Bicycle Inventory Valuation
Tuesday, February 9, 2010
Revenue
as
Average
Cost of
percent Aggregat
Current Number
Total
of Cost of
e
Total
Make of
Number Inventor
of
Rental Revenue Inventro Inventor Business
Bike
Bike Cost on Hand
y
Rentals Revenue per Bike
y
y
Revenue
Wonder 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
$14,245
$31,235
$28,755
Net
Income
$11,750
$14,510
Current
Return
on Assets
60.3%
101.9%
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