I.

Purposes of the Brief This brief amicus curiae does not address the merits of the predatory pricing allegation against BuyGasCo Corporation ("BuyGasCo"). It speaks only to the nature of the cost accounting system that we, as students of accounting, think to be appropriate for addressing the issues presented by cases of this general type. We offer our views on this subject out of concern about the allocation of indirect costs used in assessing the appropriate gasoline cost value in State of Florida v. BuyGasCo Corporation, 2003-05143 (D. FL. 2003). We regard the allocation system employed in that opinion to be inconsistent with systems in common practice. Use of that system has a potential adverse effect on both the motor fuel retailing industry and the motor fuel market. It should not be employed in judging the issues in the Florida v. BuyGasCo dispute. This brief aims to aid the court in constructing a more appropriate framework for resolving the indirect cost allocation issues presented by the case. Before proceeding with a discussion of this framework, it may be helpful to the court to know that we agree with the view expressed in the initial decision: that BuyGasCos cost for regular grade gasoline exceeded their price. We understand that the court is currently considering BuyGasCo's motion for appeal and that the motion relies heavily on the cost accounting system developed by Dr. J. T. Humboldt. Although we agree with the accuracy and fundamentals of Activity-Based Costing systems such as Dr Humboldts, we disagree with his allocation methodology and calculations. II. Background The Florida Motor Fuel Marketing Practices Act (MFMPA) determines motor fuel cost for non-refiners as the actual invoice price, including associated freight charges and taxes, plus direct labor and reasonable rental value of the outlet attributable to fuel sales. The invoice price by its nature can be directly attributable to each grade of gasoline at a per gallon rate. As such, this cost will be referred to as the direct cost for the remainder of this brief. On the other hand, labor and rent (also referred to as indirect costs) cannot be directly attributable to each grade at a per gallon rate. It is the methodology of creating attribution rates for these indirect costs that is the point of contention between the parties. From the hearing, the plaintiff alleged that the indirect costs vary in direct proportion to the number of gallons of gasoline sold per month. Consequently, they allocated the costs based on the average amount of gasoline sold per month. The results of this approach were shown in Plaintiff Exhibit A (Exhibit 1). Exhibit 1 Plaintiff Exhibit A Calculation of Costs and Profits for BuyGasCo Corporations Gasoline Products Prepared by Mr. Donohoe, CPA Regular Plus Premium Total Avg Monthly Gallons Sold 342,203 127,120 98,178 567,501 Percent of Total 60.3% 22.4% 17.3% 100.0% Avg Monthly Indirect Costs $20,006 $7,432 $5,739 $33,177

Cost Per Gallon $0.0585 $0.0585 $0.0585 Price Direct Cost Indirect Cost Profit(Loss) Premium $1.43 $1.22 $0.0585 $0.1515 Plus $1.36 $1.20 $0.0585 $0.1015 Regular $1.23 $1.18 $0.0585 ($0.0085) In contrast, the defendant stated that the resources that generated the indirect costs were used equally by each grade of gasoline. As a result, they first allocated the indirect costs evenly to each grade then divided by the average amount of gasoline sold per month. The results of their analysis were shown in Defenses Exhibit 1 (Exhibit 2). Exhibit 2 Defenses Exhibit 1 Calculation of Costs and Profits for BuyGasCo Corporations Gasoline Products Prepared by Mr. Faranhat, CPA Regular Plus Premium Total Avg Monthly Indirect Costs ($33,177/3) $11,059 $11,059 $11,059 $33,177 Avg Monthly Gallons Sold 342,203 127,120 98,178 567,501 Cost Per Gallon $0.0323 $0.0870 $0.1126 Price Direct Cost Indirect Cost Profit(Loss) Premium $1.43 $1.22 $0.1126 $0.0974 Plus $1.36 $1.20 $0.0870 $0.0730 Regular $1.23 $1.18 $0.0323 $0.0177 III. Refined Costing Both the Plantiff and the Defendant allocate all indirect costs from a single cost pool using what is referred to as a simple costing system. This system is often imprecise as it distributes costs on the basis of a single variable when there are typically several factors involved, particularly when there are multiple end-products sold. To address this imprecision, we offer a refined costing system which reduces the use of generalized averages in the allocation of costs. In general, this is accomplished by first dividing the indirect costs into homogeneous pools so that we can more appropriately distribute them. Second, these cost pools are allocated on the basis of the driver of that cost segment which ensures that costs are more accurately tied to their source. Thus, a refined costing system is preferable as it ultimately delivers a more correct cause-and-effect relationship between costs and their sources.

Although this system is preferable, it has some disadvantages. First, refined costing systems require more information about the nature of the costs involved, and often gathering this information results in additional costs for the firm. Second, even with a broad range of data available, some averaging and estimations are still necessary. So, without outside motivation, such as the MFMPA, small firms retain simple costing systems. IV. Dr. Humboldts Refined Costing System In his analysis for the Defendant, Dr J. T. Humboldt proposed BuyGasCo adopt a refined costing system one which could be used in an appeal of their case. In his system, Dr Humboldt proposed using three cost pools. The first pool includes the estimated monthly labor costs of $5.220. The second and third pools are allocations of the reasonable rental value of $27,957. These pools were divided on the basis of the relative costs of assets of each retail outlet. Sales attendant housing facilities represent 16.1% of the total associated cost of facilities while gasoline dispensing facilities account for the other 83.9%. As such, $4,501, representing 16.1% of reasonable rental value, has been allocated to the second pool and $23,456, or 83.9%, was allocated to the third pool. Dr Humboldt allocated the first and second poolswhich comprise the labor and estimated sales attendant housing costson the basis of the gallons of gas sold. So, 60.3% were assigned to regular grad, 22.4% to plus and 17.3% to premium. The third pool was determined to be driven by the number of grades, so that pool was evenly divided among all grades. By allocating both on the basis of gallons of gas sold and number of grades, Dr Humboldt derived a total cost that is between those suggested by the Plaintiff and the Defendant who each used only one cost allocation base. Ultimately, Dr Humboldt determined that gasoline was not sold below cost. The details his analysis are listed in Exhibit 3. Exhibit 3 Humboldts Refined Costing Method Cost Pool Driver Regular Plus Premium 1: Labor ($5,220) Gallons of Gas Sold 60.3% $3,148 22.4% $1,169 17.3% $903 2: Attendant Housing ($4,501) Gallons of Gas Sold 60.3% $2,714 22.4% $1,008 17.3% $779 3: Gasoline Dispensing ($23,456) Number of Grades 33.3% $7,818 33.3% $7,819 33.3% $7,819 Total Cost $13,680 $9,996 $9,501 Cost Per Gallon $0.0400 $0.0786 $0.0968 Price Direct Cost Indirect Cost Profit(Loss) Premium $1.43 $1.22 $0.0968 $0.1132 Plus $1.36 $1.20 $0.0786 $0.0814 Regular $1.23 $1.18 $0.0400 $0.0100

V. Analysis of Dr. Humboldts system Although Dr. Humboldts system is more sophisticated than those originally offered by both the Plaintiff and the Defendant, it is flawed in its use of number of grades as the sole driver of gasoline dispensing associated costs. We submit that these costs are partially driven by number of grades and partially by gallons of gas sold. As such, we find that the use of a single pool for gasoline dispensing associated costs is inaccurate. On the other hand, we agree with the use of gallons of gas sold as the cost allocation basis for both labor and attendant housing as an increase in the number of gallons sold would lead to increased need for labor and housing. We also agree that the reasonable rental value should be divided on the basis of the relative costs of associated assets of each retail outlet as the rental value represents a monthly allocation of these costs. VI. The recommended ABC system As discussed above, we agree that labor costs comprise a distinct cost pool to be allocated according to the gallons of gas sold as proposed by Dr. Humboldt; however, we suggest that the division of the reasonable rental value be re-evaluated. In our analysis of BuyGasCos gasoline dispensing assets, we were able to determine which assets were characterized as grade specific and which were common to all grades. The details of this analysis are listed in Exhibit 4. With this information, we are able to set allocation percentages of the reasonable rental value among three pools: attendant housing, common gasoline dispensing and grade specific gasoline dispensing. Details of this allocation are listed in Exhibit 5. Exhibit 4 Breakdown of BuyGasCo Gasoline Dispensing Assets for a Typical Florida Gasoline Service Station Asset Cost Common Grade Specific Holding Tanks $90,330 X Pumping Equipment $69,690 X Plumbing $50,410 X Piping $40,565 X Multi-Product Dispensers $116,520 X BuyGasCo Sign $29,660 X Canopy $123,480 X Islands $87,710 X Electrical Equipment $80,860 X Lighting Fixtures $40,340 X Exhibit 5 Cost of Gasoline Sales Associated Assets

Used to Assign the Reasonable Rental Value Attendant Housing Common Gasoline Dispensing Grade Specific Gasoline Dispensing Total Cost $140,000 $478,570 $250,995 Relative Percentage 16.10% 55.04% 28.86% Assigned Portion of Reasonable Rental Value $4,501 $15,388 $8,068 Using these values, we developed a costing system consisting of four cost pools: labor costs, attendant housing costs, common gasoline dispensing costs and grade specific gasoline dispensing costs. Labor, attendant housing and common gasoline dispensing vary most with gallons of gas sold and are allocated accordingly. Grade specific gasoline dispensing varies with the number of grades sold and will be divided evenly among all grades. The details of this system are listed in Exhibit 6. In the end, we have determined that plus and premium grades were sold at a net profit; however, regular grade gasoline was sold at a $0.0021 loss. Exhibit 6 Recommended Refined Costing Method Cost Pool Driver Regular Plus Premium 1: Labor ($5,220) Gallons of Gas Sold 60.3% $3,148 22.4% $1,169 17.3% $903 2: Attendant Housing ($4,501) Gallons of Gas Sold 60.3% $2,714 22.4% $1,008 17.3% $779 3: Common Gasoline Dispensing ($15,388) Gallons of Gas Sold 60.3% $9,279 22.4% $3,447 17.3% $2,662 4: Grade Specific Gasoline Dispensing ($8,068) Number of Grades 33.3% $2,689 33.3% $2,689 33.3% $2,690 Total Cost $17,830 $8,313 $7,034 Cost Per Gallon $0.0521 $0.0654 $0.0716 Exhibit 6, continued Price Direct Cost Indirect Cost Profit(Loss) Premium $1.43 $1.22 $0.0716 $0.1384 Plus $1.36 $1.20 $0.0654 $0.0946 Regular $1.23 $1.18 $0.0521 ($0.0021) VII. Conclusions

For the reasons set forth above, the judgment of the hearing should be affirmed. Respectfully submitted, October 9, 2006