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IFSM 300 Final Assessment ExamNOTE:As for all work in this class, the final exam must be original work developed by thestudent solely for use in this class and must conform to UMUC’s academic policies.Instructions:Use the Case Study presented here to answer the questions below.Your answers should be longenough to answer each question fully and completely and typed below the individual question in thisdocument.Follow the instructions in the questions to determine the appropriate length of yourresponses.Your answers should demonstrate an understanding of the concept(s), should applycritical thinking, and should provide analysis of the Case Study in light of the concepts(s).Youshould not just re-iterate what has been presented in class, but integrate the information and relate itto the Case Study.Proper APA style must be used for any citations and references that you use.Your exam will be graded on the completeness and accuracy of your responses and whether youhave appropriately tied your responses to the Case Study.Responses that do not mention the CaseStudy will receive very few points, if any.Each question is worth 10 points.Virginia BikesCase StudyIn 1985 Bill Thomas took $6,000 of his savings, borrowed another $4,000 from his best friend, andopened a bike rental business in Vienna, VA.The rental shop is adjacent to the Washington & OldDominion Trail (W&OD) that goes from Purcellville to Old Town Alexandria (45 miles), connects tothe Mt Vernon Trail (18 miles) and ends at George Washington’s Mt Vernon Estate.Bill, bought 10bikes for his first store. The location has parking, and is near the historic Vienna Inn and a number offood and drink establishments.He has since opened stores in Old Town Alexandria and Reston, VA,where he sells, rents and repairs bicycles.The Vienna store is now Bill’s anchor store, and at 5,000 square feet, it is three to five times largerthan his other stores.Bill estimates he sells around 3,000 new bikes a year. Because of the highuse of the W&OD trail, especially on weekends, he also provides tune up and maintenance servicesat all of his stores for the many riders from up and down the trail.In 2012, Bill leased a store in the heart of D.C., near the Smithsonian Museums and other touristattractions.He uses this store to rent bikes to tourists and residents of the city, and does somerepairs to his rental bicycle inventory in the back of the shop.Although he has always made money, or he would not be in business, Bill has seen a decline inbikes sales of about 20 percent since 2008.He attributes this to the downturn in the economy andthe growth in Internet sales.However, his rental, tune up and repair business has increaseddramatically.Over the past few years, he realized that he must be more aware of expenses anddecrease them wherever practical in order to preserve profits.Version 31
Bill thinks that the one of the most important factors is the weather, but has no data to support thatthinking.On rainy days, there are few customers in the stores, while on sunny weekends all of hislocations are extremely busy.From spring through fall, Bill keeps all his stores open seven days aweek, while in the winter months he opens his stores on the weekend when the weather is good forriding.Through observation, Bill figures his highest sales occur in May, and that June andSeptember are his best months for rentals.He also sells many bikes during the holiday season inDecember, but in January and February, he often wonders if he should close shop and go to Floridafor a couple of months.Virginia Bikes grosses between $5 and $8 million annually and earns Bill a comfortable six-figureincome.Each year, he leaves a considerable amount of cash in the business so that he does nothave to borrow money to keep his business going.He sells a wide variety of bikes (from tricycles fortoddlers to sophisticated racing bikes) and accessories such as helmets, speedometers, bike racks,repair kits, and clothing.Bicycle sales have decreased to account for 25 percent of revenues.Accessories such as helmets, bike racks, gloves, and locks amount to another 5 percent.Rentalsmake up about 35 percent, and repairs make up the remaining 35 percent.In recent years, he has noted that customers are less likely to purchase the high-end road andtriathlon bikes, and are purchasing bikes in the range of $400 to $1,000.The lower-priced bikes arealso easier to sell and to keep the inventory moving.Most of the rental business is concentrated in the downtown D.C. and Alexandria stores, due to thetourists and university students located near those stores.Bill is excited about rentals, as they havea huge profit margin.He can charge as much as $50 a day, which means the bikes pay forthemselves after just a few rentals.Bill’s expenses include such costs as new bikes, parts and accessories, rent and payroll.Henegotiates leases for all his locations except the Alexandria store, which he owns outright.Bill has15 full-time employees and usually hires another 15 part-time employees during the busy monthsand weekends.Until two years ago, he was spending about $30,000 a year on advertising in local papers.Now heuses a simple website and has links on many of the local biking trail sites to provide informationabout his various locations, and his advertising budget is close to zero.In the late 1990s, Bill over-expanded to six stores, including a store in Purcellville, VA, and one inBethesda, MD.The expansion necessitated a warehouse in Springfield, VA, the hiring of a generalmanager and considerable overhead expenses.In a subsequent cost-reduction effort, Bill closedthe Bethesda store, gave up the warehouse and moved his inventory to the Vienna store, and let thegeneral manager go.Now, he handles all the general management tasks himself, which affects thetime that he has available to plan and develop strategies.Bill further reduces his expenses by working in the Vienna store two days a week.Since he has onlyone staff person in some of his stores, he has to make special arrangements if that person does notcome to work, or takes a day (or week) off.He is trying to expand the bicycle repair work, especially on the weekends, so he will be able toincrease revenue from this profitable aspect of his business.He needs to have repair capability ateach store to maintain the rentals, prepare the new bikes for sale, and perform the periodicmaintenance for the bikes that he has sold, as well as provide the breakdown repairs andadjustments for the riders on the trail.Version 32
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