Baldwin Bicycle Company

BALDWIN BICYCLE COMPANY

Baldwin Bicycle Company has been a bicycle manufacturer who produced various high quality models. Due to competition in 1981, the firm’s sales revenues significantly dropped in the following two consecutive years. In addition, it could only operate at 75 percent of the plant’s capacity.

In May 1983, the firm received a proposed production plan of sporting bicycles, named Challenger, from Hi-Valu. There would be two types of direct costs associating with the new bicycle production, including one-time costs such as costs of preparing drawings and arranging sources that were not in current models and ongoing costs of producing bicycles such as materials, wages, and overhead. Indirect costs would be asset-related costs based on annual percentage of dollar value of assets such as cost of debt and book keeping of receivables and inventories, insurance and state property tax of inventory, etc. As a result, Hi-Valu would buy approximately 25,000 bikes at $92.29