Responsibility Accounting & Transfer Pricing - Shuman Automobiles, Inc
Facts of the Case:
1. Clark Shuman, owner and general manager, plans to retire and relinquished his control over the company
2. Business has been doing good with an emphasis of selling new cars as the principal business of the dealership
3. He created three independent departments, namely new car sales, used car sales, and service department.
4. Salary is dependent on each department's gross profit
5. Upon the take over of the managerial positions, Janet Moyer of the new car sales had a first challenge of making a sale through a costumer who wanted to trade his old car with a new car.
6. Moyer had to decide the amount she would offer the costumer for the trade in value of the old car.
7. The new car model has been in stock for some time and the model wasn't selling.
8. The list price of the new car is $14400.
List Price of New Car: $14400
Cost of the New Car: 12240
9. Paul Fiedler, the used car manager, estimated the reconditioning work to cost $840, and the car could be retailed at $7100 or wholesaled at $6100.
10. Blue Book price range of buying this model of car in good condition is from $5500 - $5800. Fiedler estimated he could sell the trade-in car at an auction as is at $5000.
11. If Moyer would sell the car without trade in, she will have to deduct about 8% from the list price, which makes the sales to $13,248.
12. Nate Bianci is charging the used car department for $2,000. Total cost of repair amounted to 1,594 and based on Blue book, charges for this kind of repair ranges from 1,960 2,040 and she has always aimed for the middle of the BB range.
Questions:
1. Suppose the new-car deal is consummated, with the repaired...
... middle of paper ...
...me for the learning curve, it may be assumed that the company will become more profitable with each center geared towards generating profits. Adopting a decentralized form of management may work well if each department will still think of the welfare of the other departments in the company. Decentralization should not create division but greater cooperation and teamwork.
Another option that the company can take is by merging the use-car department and the service department, making the latter both a cost center and a profit center. Providing service internally without any charge but will still accept job orders from the outside to cater the maintenance service both for the new car customers and used car buyers. Besides, based on the statement of income of the service department has not been making any profit and even incurred loss of about $8,000.
cost $4,000 annually, but the upfront cost of a car is still great, and few Americans can afford to buy
Birch’s division managers normally were free to buy materials or inputs from whichever supplier they wished, and even on sales within the company; so divisions were expected to meet the going market price if they wanted the business.
When I turned twenty-two I was excited to purchase my first car, I had been saving for 5 years in order to obtain the car of my dreams. I knew exactly what I wanted, all the “bells and whistles”, and I knew exactly what I was willing to pay and not a penny more. I thought I had a strong knowledge of the sales and pricing of the particular car I was hoping to buy, because I had done my research for weeks browsing and comparing the Sunday car ads. I was assured that my knowledge of the sales would get me a fair price and a great deal. However, my overconfidence and naivety, in the “creepy” sales tactics used by the dealership, made me unaware of the three hour nightmare that was about to ensue; leaving me brokenhearted, angry and vowing to never step foot on a car lot again.
Porsche came out with the models of 914 and 944 because they take the consumers with lower income into account during the recession of 1970s. They redesign, reposition and reprice the vehicles so that it is allow the consumers to purchase the product for the purpose of social class, family needs or status. With this, Porsche still able to create loyal customers even if the economic situation did affected their business when they have considered their customers’ personal income, savings and interest
(1200.= price of 7 ½ hp which is 3rd in torque but above 70pf or the price of the 10hp reduces to the 71/2hp price)
Buyers: Consumers of a BMW 3-Series vehicle include anyone in an average income middle-class to high-class household. This line of automobiles will run a MSRP starting at $32,750 for the base 320i up to $60,00+ for a fully equipped 335i xDrive Gran Turismo. Due to the great amount of information on manufacturing costs and pricing of these vehicles that is easily ...
initial availability. The price for the X5 is $49, 400, $44,620 for the dealer invoice, and
(Case: The Ford Pinto, n.d.) A report focusing on fatalities was included and illuminated the cost associated with technical improvements to the vehicle. An estimate was even applied to an estimate of how many people could be killed and even assigned a dollars-and-cents figure to the value of a human life. (Case: The Ford Pinto, n.d.)
Political and Legal forces directly affect the future production of Porsche vehicles with such requirements as regulatory gas mileage and EPA guidelines. Political issues and governmental decisions affect the development of the local economy. For example, the increase of oil prices during the Iraq war and the drop of the dollar compared to other currencies can have a significant influence on sales in the automotive industry. The VW sales group (who currently own Porsche) have laid a plan to exceed GM and Toyota in sales by 2018, but with pending EPA guidelines this may create a definite challenge.
Pricing for the 2016 Accord starts at $22,925 (including $820 destination fee) for the base model LX sedan with the six-speed manual
total market for that good. For instance eBay's largest auction category (eBay Motors) has less
Have you ever wondered why it cost you hundreds of dollars to get a belt changed on your car? The answer is simple: Auto-repair fraud. According to Norris and Engel’s book Auto Repair Fraud, the number one consumer complaint in the country is auto repair fraud. Americans pay more than 29 billion dollars a year to service and repair vehicles. According to a three year U.S. Senate sub-committee investigation into the auto repair industry, one-third of all car repair dollars, ten-billion dollars a year, is wasted on inadequate, inept, or corrupt service.
...e, but this year marked the release of the GT California Special package on GT premium models and the release of the Shelby GT and the Shelby GT 500, capable of producing 500 horsepower. The year 2009 marked the release of the GT 500 KR. The glass top was the only major change to the body style this year. In 2010, the Mustang featured a new redesign. The Mustang had more power and featured a revised interior and exterior (Jackson1).
In addition to the car model and color choices were decisions on options packages. And having seen the "pimped out" SUVs on MTV Cribs, complete with two or three LCD screens (one in the dashboard for the driver, of course), DVD player, speakers costing more than my college education, GPS navigation systems similar to those used in the Space Shuttle, heated seats, and 20 inch chrome wheels, my eyes were wide with opportunity. After checking on financing and whittling down the alternatives to what I might really need or want, I ended up with the most basic of standard packages.
Responsibility accounting is the practice that focuses on providing financial information useful in evaluating efficiency and effectiveness of managers or department heads, on the basis of financial performance directly under their control. Responsibility accounting is also based on the assumption that every cost incurred must be the responsibility of one person somewhere in the company. Examples could include; the cost of rent being assigned to the person who negotiates and signs the rental agreements; or the cost of an employee’s salary being the responsibility of that person’s direct manager, or human resources manager (S. Bragg, 2010).