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4/7/12
Introduction
Franchised dealer and authorized service
center for Ford, Saab and Volkswagen and body shop (back end) were the departments in the company
Question 1
Using the data in the transaction , compute the profitability of this one transaction to the new, used, parts and service departments. Assume a sales commission of $250 for the trade in on a selling price of $5000
New Used Car Parts Car Revenue 14150 5000 135+30 +80=24 5 Costs
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(11420) (750)
(167.86) (134.29)
Question 2
How should the transfer pricing system operate for each department?(market price, full retail. Full cost , variable cost)
The transfer pricing system should be
operated at market price system because the department could cut off the non value added costs for other department and still refer to the market situation each of the departments but not at the cost of other department
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Question 3
If it were found that the trade in could be wholesaled for only $ 3000 which manager should take the loss? If the used car is sold at auction for $3,000 after the trade-in value was set at $4,800, the company should note a loss of $1,800. However, if the new car salesman only gives $3,500 of value to the new customer based on the Blue Book value, then the loss reflected on the income statement and balance sheet should only be $500.
The wholesale guidebook value for used cars
is $3500
Question 4
North Country incurred a year-to-date loss of about $59,000, before allocation of fixed costs, on the wholesaling of used cars, which is theoretically supposed to be a break-even operation. Where do you think the New car owners were giving customers problem lies?
looking to trade-in existing cars above market valuations on their used cars $4,800 for a used car that is worth $3,500, the used car group would have a difficult time making a profit
above) where they could sell the car for $5,200 and still make a profit despite the inflated prices, most of the time they will have 4/7/12
Question 5
account for the traceable fixed cost related to that profit center
This method could encourage the manager
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Question 6
accepted by all the managers and thereby decrease any competition between them.
Each department should be evaluated by full
manager based not only on the department 4/7/12 performance but all the overall company
Thank You
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