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...
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...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.
The Attorney General and the Department of Motor Vehicles of several States are now putting auto dealers on notice. In the states of New York and Nevada they are warning them: “Your advertisements had better be accurate” (Knapp, Eyewitness News, 2004). Studies from the Attorney General of New York Eliot Spitzer, gives many consumer tips to finding misleading advertisements. “Push, Pull, and Drag it in, Guaranteed Trade-in $3,000!” This is a ploy slogan that really confuses consumers, especially college students. In reality, the dealers cannot pay money for a trade in no matter how much it is actually worth. The dealers can only put that hypothetical “trade-in money” toward the purchase of another car. “Dealers often raise the prices of the cars on their lots prior to this sale” (Spitzer, 2003). So in the end, you are really not getting much of a bargain. When watching a car commercial, look for the details in getting this new car for your “push or pull,” there should be a description of how much money must be put down at the time of the trade. If this is not being done, you can report the violating car dealer to your state attorney general’s office.
Karen and Jim purchased the car with their joint bank account as co-owners, to be used as a family car when they were still together. However, Karen and Jim were estranged at the time of the accident. Karen continued to pay all of the car’s up-keep after their separation, and she allowed Jennifer limited permission to use the car to go strictly to and from school and restricted Jennifer’s access otherwise.
... doors and manifolds. Mufflers directly contributed $28,911 in 1987 and $30,975 in 1988 and oil pans contributed $36,997 and $39,566.
John Deere Component Works (JDCW), subdivision of John Deere and Co. was in charged specifically of the manufacturing of tractor component parts. The demand for JDCW’s products had problems due to the collapse of farmland value and commodity prices. Numerous and constant failures in JDCW’s competition for bids, alerted top management to start questioning their current costing methods. As an outcome, the analysis has to be guided to research on the current costing methods with the intention of establishing legitimacy and to help the company in adopting a more appropriate costing system.
cost $4,000 annually, but the upfront cost of a car is still great, and few Americans can afford to buy
• Differentiated themselves from the typical used car lot by introducing service departments and their own financing arm. CarMax Auto Finance income increased 14% to $300M totaling $5.93B in
afford. When he wanted to start to produce the car he faces a lot of barriers,
“Best Selling Car in America”: this is the claim Toyota has made regarding its popular model, the Camry. Indeed, “The Toyota Camry remains the top-selling passenger car in America” (Stern et al., par. 2). This has remained true during the last 4 years and throughout the last 8 of 9 years. It has sold 340,905 units during the initial 9 months. Of the above images, the car on the left would be the Camry. We see it resting on pavement while vegetation grows in the background. Overall, it comes in at no. 3 on the top ten list. The image on the right is the Toyota Corolla. The automobile sits on an elevated, mountainous region. “The Corolla is Toyota’s compact sedan that has been sold in the U.S. since 1969 and is consistently one of the best-selling cars in the world” (Stern et al., par. 1). The Corolla ranks in at no. 8 with 216,934 units sold.
best price for the car. Instead, the confident buyer of the car will take the price quoted by the salesman as the negotiations starting point. It would therefore be wrong to imply that bluffing is unethical since both the seller and the buyer are positioning them self to maximize their opportunities. The buyer negotiates the price in order to purchase the car at the lowest price possible, while the seller does his best to sell the car at the highest possible price. Therefore, there is no violation of ethical conduct. In the business game, everyone is looking for an opportunity to get the best out of the
(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.)
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.
Though many changes have come to two different companies, many of the changes appear to be positive for both entities. Profits are up and there is a business plan in place to grow the company to possibly be a global leader in the automotive industry. This is a new beginning for Chrysler Group, LLC and a new chapter in the book to be placed in this company’s history.
Sia’s maximum that he would be willing to pay, is $12,000 and Mike’s minimum he would be willing to accept is $10,000. An agreement, if one is reached, will create $2,000 in integrative value compared with no deal, because Sia one-sidedly values the car $2,000 more than does Mike. How that $2,000 is divided between them whether, let 's say, the price agreed to is $10,000, $11,000, or $12,000 is a matter of distributive negotiating: any gain for Sia means pain for Mike, and the other way around. It’s, therefore, fair to describe this as generation of $2,000 in distributive value, distributed in accordance with distributive negotiating skills. On the other hand, what if Mike is an exceptional mechanic and enjoys spelunking in his spare time. Sia, conversely, can’t fix anything, and he hates having to take his car to unfamiliar mechanic shops since he fears that they will take advantage of him. These details propose that more integrative value might be created by the sale of the car if Mike will guarantee to repair any item that breaks for 9 months after the transaction. Let’s assume, for example, that this would cause Sia’s maximum price to increase to $12,500, while Mike minimum price would increase only to $10,200. Any deal that incorporated the repair agreement would be collaborative because it would generate more integrative value than the parties could achieve through the sale of the car alone. The additional $300 can be explained as the value that can be created by the negotiators’ integrative negotiating skills. “In addition, positive emotions make the parties less contentious and more optimistic about the future, which, in turn, increases the chances they will search for multiple alternatives and find a better integrative—win–win—agreement.
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
Pricing for the 2016 Accord starts at $22,925 (including $820 destination fee) for the base model LX sedan with the six-speed manual