line #

Analysis of Body shop Profitability 1 Sales COGS 2 Gross Profit 3 Gross Profit percentage Analysis of Semivariable costs For Body Shop Alone Legal and Auditing Owner's salary (body shop) Telephone & Telegraph (body shop) Total Body Shop Semi Variable costs For the company Legal and auditing (company) Owner's salary(Company) Telephone & Telegraph (company) Total Company Semi Variable costs

Values 306652 215545 91107 29.71%

4 5 6 7

0 0 839 839

8 9 10 11

2113 21600 21676 45389

12 13 14 15

Revising the Costs - (1) Semi variable Costs (2) Fixed Costs Revising Semivariable Costs using Body Shop Employees ratio Total body shop % of Semivariable Costs - OLDER 1.85% Body Shop Employees as % of total - NEWER 21.74% Revised Body Shop Semivariable Costs 9867.173913 Increase in Body shop Semi-variable costs 9028.173913 Analysis of Fixed Costs

16 17 18 19 20

Body Shop Fixed costs, AS NOW ALLOCATED Total Company Fixed Costs Body Shop % of fixed costs Revised Body Shop Foxed Costs (20% of Total Company Costs) Decrease in Body Shop Fixed costs

6106 28815 21.19% 5763 (343.00)

Summary of Findings 21 22 23 24 25 Net Increase in Costs Unrevised Body Shop Profit Revised Body Shop profit Unrevised Profit to Sales Revised Profit to sales 8685.17 9009 323.83 2.94% 0.11%

Body Shop Employees as % used as Measure of Semivariable costs Total Employees 23 Body Shop Employees 5

Revised Body Shop Costs :

20%

of total costs

which is = sum of increase/decrease in Semi variable costs and Fixed costs which factors in Net Increase in Costs in Unrevised body Shop profit which is = Unrevised body shop profit / Body Shop Sales which is = Revised body Shop profit / Sales

Adjustments
Adjustments in Semivariable Costs & Fixed costs Consultants #1 In revised calc. Body Shop Employee ratio considered as a factor
Semivariable costs incurred

#2

20 % of Fixed costs - Assigned to body shop - Assumed Fixed costs Incurred

SUGGESION
Components of Semi-variable Costs #1 Legal and auditing - to be Apportioned To all depts as every dept benefits #2 Owner's Salary - apportioned according to the Gross profit % by Body Shop #3 Telephone and Telegraph Cost - Allocated on usage basis Total Semi Variable costs Increase in Semi variable Costs relative to Unrevised value Components of Fixed Costs Consultant : Assumes 20 % as fixed costs contibution of Body Shop SUGGESIONS : Suggestion 1 : Suggestion 2 : Allocate based on M/C, Equipt. in dept Allocate based on a weight attached to Square footage based allocation ratio Suggestion 3 : Allocate Fixed Costs based on the Average of Industry Standards Suggestion #3 was acceptable Suggestion #3 already has data needed in the Exhibit

#1 #2 #3

Industry Average of Fixed Costs Delaney's New Fixed costs Increase in Body Shop Fixed costs ( excess of 6106[old unrevisedvalue])

Net Increase in COSTS = Increase in Fixed Costs + Increase in Semi Variable Costs

Unrevised Body Shop Profit (given) Revised Body Shop Profit = (is IN FACT A LOSS !!)

Revised LOSS to Sales

Unrevised 1.85% 839.6965 21.19% 6105.8985

Revised 21.74% 9867.173913 20.00% 5763

Revised - consultant Our Suggestion

459.3 4695.7 4712.2 9867.2 9028.2

459.3 _ Ratio of No of employees is taken as the factor 6415.2 _ Allocated depending on the Profitability of the department 839 _ Allocated on usage basis 7713.5 6874.5

visedvalue])

12044.7 12044.7 5938.7 12813.2

ariable Costs

9009 (3804.2)

-1.24%

n as the factor

tability of the department

Line #

Other Dealers Dealer #9 Dealer #6 Delaer #3 363662 505025 681201 32.90% 30.00% 30.60% 119644.80 151507.5 208447.506 9547 12767 22314 4453 (8190.00) 1.22% -2.25% 13913 11134 25047 26338 19386 5.22% 3.84% 18177 12233 30410 56401 36650 8.28% 5.38%

1 Sales, Body Shop 3 Gross Profit Percent 2 Gross Profit 14 Body Shop , Semi variable 19 Body Shop, Fixed ## Body Shop ,Total Costs 22 23 24 25 Body Shop Profit, Unrevised Body Shop profit ( loss), revised Unrevised % Profit to Sales Revised % profit to Sales

Revision is always resulting in Approx 3% reduction in Profit to Sales Ratio

Delaney Body Shop Our Suggestion 306652 306652 29.71% 29.71% 91106.3092 91106.3092 9867 5763 15630 9009 324 2.94% 0.11% 7713.55 12044.67 19758.21 9009 (3804.21) 2.94% -1.24%

ales Ratio

Price Change Reqd in Our Method

Indutsry Average Profitability = Current Profitability = 2.32% -1.24%

Assumed - Profitability of 29.7 % assumed constant for Body Shop With this reqd increase in profitability the profit has to increase Sales COGS Gross Profit Other expenses Increase in Costs Net Profit Net Profit / Sales = profitability Desired Required Increase in Prices = = We observe from Data Table that At NO sales value level there is Profitability in the positive for Body shop with the Team's Suggested Cost method Hence, We recommend that Delaney Should sell their Unit And Concentrate on their Other Departments New Sales - Old Sales Old Sales

510000
358530 151470 142461 calc as Gross profit - Unrevised Net profit 12813.21449 After considering our suggestion -3804.214493 -0.75%

66.31%

NOT FEASIBLE

nrevised Net profit

Data Table 290000 300000 310000 330000 350000 370000 390000 410000 430000 450000 470000 490000 510000 530000 900000 570000 590000 610000 10000000 100000000 0 0 -0.75% At the current Net Profit level -1.31% -1.27% -1.23% -1.15% -1.09% -1.03% -0.98% -0.93% -0.88% -0.85%
-0.81% -0.78% -0.75% -0.72% -0.42% -0.67% -0.64% -0.62% -0.04% 0.00% #DIV/0!