Birlin Toyota case (Case Study Sample)
1. Assuming the same gross profit rate $10.6% and target profit $1,300 per vehicle as in “A Note on Trading In Motor Vehicle” (page 29), calculate the maximum trade-in allowance in Mr. Bogard’s initial negotiations with the customer. 2. Evaluate the way the service department charges for the internal work. Service department (represented by Mr. Berry and Mr. Rounds) is frustrated with the current interdepartmental pricing system. What suggestions would you make to improve the situation for Berlin Toyota as a whole? 3. Comment on the allocation of general overhead ($269,559 in Exhibit 3) to the four sections (that is, Customer Pays, Internal, Warranty Work, Extended Work) of the service department. What measure should be used to evaluate profitability of the four sections? 4. What suggestions would you make to reduce the conflict between the new car sales department and the used car sales department? 5. Evaluate the current “profit center” system employed by Berlin Toyota. Given the conflicts among profit centers as illustrated in the case, what suggestions would you make to improve?source..
Berlin Toyota Case Study
After assuming the same gross profit rate as $10.6 percent and target profit as $1,300 for every vehicle, we calculated the maximum trade-in allowance in Mr. Bogard’s initial negotiation with the customer in the following way.
List price = $30000
Approximate cost = 26820
Gross profit = (3180)
Additional profit = 1300
ACV of trade-in = (7200)
Need to realize = 28120
Difference = 20920
List = 30000
Maximum allowance = $9080
According to my observations, the standard maintained regarding the price of labor is quite confusing and the main problem is that customers mostly calculate the minimum labor price and do not care about the exact price of parts of the vehicle, which seems to be out of their range and this is why the service department has to face consequences. It is not good for the company, so the only way to solve the problem is to mention the actual price of parts of the vehicle before finalizing a deal. The service department’s Mr. Berry and Mr. Rounds are not happy with the current interdepartmental pricing system. They can take initiatives in this regard and should tell customers everything about the actual amount of the vehicle by including the service charges etc. There is no need to hide anything. People working in the service department might have to bear the necessary costs if they do not clarify things initially. They won’t have to spend anything on the maintenance of vehicles if they begin charging customers extra amount.
The service department charges its customers in four ways: customer pays, internal, warranty work and extended work. In reality, what customers pay does not come under this category, meaning the service department has nothing to do with what the clients are being charged. I th
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