Financial Analysis and Production Plan for Billing AS Report

This report presents a financial analysis of Billing AS, examining pricing strategies, sales data, and production plans. It details the rationale behind price setting, considering inflation adjustments. The report analyzes production costs, sales margins, and profit statements, providing a comprehensive overview of the company's financial health. Furthermore, it explores the implications of a joint venture with Sea Dragon, evaluating the potential benefits in terms of cost reduction and dispute resolution. The analysis also considers various methods for resolving stalemates within a joint venture, such as purchase-sale arrangements. The report uses data to calculate costs, revenue, and profit margins, offering a clear understanding of Billing AS's financial performance and strategic recommendations.

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Question 1

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Explain your rationale for setting prices.
Type of boat Present year sales Adjustment of
inflation (3%)
No. of Boats Sales price
B-16 7128000 7341840 240 30591
B-29 - -
B-33 12816000 13200480 240 55002
B-35 1039500 1070685 240 4462
The rationale of setting the prices is based on the adjusted inflated prices of 3% in terms of sales
then divided by the number of units of the boats to get selling price per unit. The reason why
only inflation was factored in and not the exchange rate is because it is only meant for domestic
use. If the boats were for export, then inflation and currency exchange would have been factored
in.
The rationale for setting selling prices is simply adjusting inflation costs and dividing it with the
number of boats that have been manufactured(Cagan, 2006).
Question 2
country Exchange
rates
Expected
inflation rate
Estimated
cost of freight
Denmark Danish 3% 15500 15965

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Kroner = 0.73
Sweden Swedish
Kroner = 0.73
1% 12500 12625
Poland Zloty = 2.02 22% 19000 23180
UK English
Pound =
11.31
3% 22500 23175
Germany Euro = 7.91 2% 20500 20910
Russia Rouble = 4.22 15% 25000 28750
The production plan for Billing AS for the coming year is such that, the type of boat with the
highest profit is needed in the highest unit production. In this case, the family boats will move
the highest number of units(Gibson, 2013).
Question 3
Sales margin
Billing AS Sales Margin
In NOK As a percentage
Sales Revenue 20,983.50
Variable cost; direct labor and materials 13640 65%

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Fixed; production 945 4.5
Product design costs 1345 6.4
Administration costs 650 3.1
Marketing costs 2300 11
Total fixed costs 5240 25
Profit before taxes 2103.5 10
Company profits
In NOK
Sales Revenue 20,983.50
Variable cost; direct labor and materials 13640
Fixed; production 945
Product design costs 1345
Administration costs 650
Marketing costs 2300
Total fixed costs 5240
Profit before taxes 2103.5
Q4

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AS billing production plan and profit statement.
NOK As a percentage
Revenue 20,983.50
Variable cost; materials &
labor
13640 65%
Fixed; production 945 4.5
Product design costs 1345 6.4
Administration costs 650 3.1
Marketing costs 2300 11
Total fixed costs 5240 25
Profit before taxes 2103.5 10
Taxes (30%)631.05 631.05
Profits after taxes 1472.45
Question 5
Billing should enter the joint adventure with sea Dragon as it will reduce the cost of
manufacturing of boats by Norwegian company Billing AS. The Chinese company manufactures
of the boats sells directly to the Chinese company(Easton et al., n.d.).
Instead of letting a market makes the business decision of great importance about the best way to
liquidate or resolve a stalemate in a joint venture, the partners of the joint venture could agree on

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the method from the beginning. The main method to resolve the stagnation of a joint venture is a
purchase-sale arrangement. The purchase-sale provisions allow the partners of the joint venture
to resolve a conflict or a stalemate by granting one of the partners of the joint venture the
possibility of buying the other part of the joint venture through an agreed process in this case the
Norwegian and the Chinese company. Although there are many problems to be taken into
account when drafting a purchase-sale provision, the purchase-sale provisions provide a more
efficient process for resolving disputes and ending a joint venture.
For different reasons, joint ventures often do not turn out as planned. The parties should think
about the possible problems and how to solve them. Although complex discussions and
negotiations will be necessary as part of joining a joint venture, this could save them all time and
money in the long term.
Finally, the judicial dissolution leaves the commercial decisions in the hands of the two
companys in joint venture agreement. In this case, the limited liability agreement of the company
was silent about the best way to dissolve and liquidate the joint venture. For this reason, this
commercial decision of great importance was left to the judge(WAHLEN, 2017).
Instead of letting a judge make the business decision of great importance about the best way to
liquidate or resolve a stalemate in a joint venture, the partners of the joint venture could agree on
the method from the beginning. The main method to resolve the stagnation of a joint venture is a
purchase-sale arrangement. The purchase-sale provisions allow the partners of the joint venture
to resolve a conflict or a stalemate by granting one of the partners of the joint venture the

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possibility of buying the other part of the joint venture through an agreed process. Although there
are many problems to be taken into account when drafting a purchase-sale provision, the
purchase-sale provisions provide a more efficient process for resolving disputes and ending a
joint venture
References