Scribd Logo
Upload

Welcome to Scribd!

  • 283 views

    Delaney Motors Case

    Uploaded by

    Saswata Banerjee
    This document is a case study solution submitted by a student. It discusses allocating costs more accurately across departments at Delaney Motors. Specifically: 1. Some costs like the owner's salary and legal/auditing fees should be allocated across all six departments rather than just the body shop. 2. Mr. Delaney could raise prices to increase profits if he also focuses on quality and reducing costs, aiming to be competitively priced between the 6th and 3rd largest competitors. 3. Mr. Delaney should accurately allocate costs across departments, understand his own costs, then consider raising prices if feasible while maintaining quality and competitiveness.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Delaney Motors Case

    Uploaded by

    Saswata Banerjee
    283 views3 pages
    This document is a case study solution submitted by a student. It discusses allocating costs more accurately across departments at Delaney Motors. Specifically: 1. Some costs like the owner's salary and legal/auditing fees should be allocated across all six departments rather than just the body shop. 2. Mr. Delaney could raise prices to increase profits if he also focuses on quality and reducing costs, aiming to be competitively priced between the 6th and 3rd largest competitors. 3. Mr. Delaney should accurately allocate costs across departments, understand his own costs, then consider raising prices if feasible while maintaining quality and competitiveness.

    Original Description:

    Solution to Case 17-1 Delaney Motors of

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document is a case study solution submitted by a student. It discusses allocating costs more accurately across departments at Delaney Motors. Specifically: 1. Some costs like the owner's salary and legal/auditing fees should be allocated across all six departments rather than just the body shop. 2. Mr. Delaney could raise prices to increase profits if he also focuses on quality and reducing costs, aiming to be competitively priced between the 6th and 3rd largest competitors. 3. Mr. Delaney should accurately allocate costs across departments, understand his own costs, then consider raising prices if feasible while maintaining quality and competitiveness.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    283 views3 pages

    Delaney Motors Case

    Uploaded by

    Saswata Banerjee
    This document is a case study solution submitted by a student. It discusses allocating costs more accurately across departments at Delaney Motors. Specifically: 1. Some costs like the owner's salary and legal/auditing fees should be allocated across all six departments rather than just the body shop. 2. Mr. Delaney could raise prices to increase profits if he also focuses on quality and reducing costs, aiming to be competitively priced between the 6th and 3rd largest competitors. 3. Mr. Delaney should accurately allocate costs across departments, understand his own costs, then consider raising prices if feasible while maintaining quality and competitiveness.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    MA Assignment -4

    Submitted by

    Gouri Sankar Sahoo

    M092-15

    Section-B
    Case 17-1

    Delaney Motors

    Solution:1.) I do not agree with the consultants exhibit. The following


    Sticky issues are: Since the body shop manager could claim, that
    because he exercises no control over the owners
    salary,

    this

    cost

    should

    not

    be

    charged

    to

    his

    department. This cost should have to be charged,


    because his salary should be allocated over all the
    departments.
    Semi-variable costs can be allocated to operating
    departments in several ways, thereby better appraising
    departmental

    and

    managerial

    performance.

    The

    allocation of some of the semi-variable costs should be


    done differently. Instead of the costs being allocated
    by percent of employee it should be allocated across
    the departments. Therefore legal and auditing cost and
    the owners salary should be allocated across the six
    departments. As a result the total of $2113 legal and
    auditing

    costs

    and

    can

    be

    departments, which is $352.17.

    divided

    by

    the

    Then the $3,600 from Companys Owners salary


    divided by the six departments to get the revised
    body shops owners salary. Thus, the increase in body
    shop semi-variable costs should be the total of $352.17
    and $3600, which is $3,952.17.
    2) If the consultant were to report that Mr. Delaney may
    feasibly raise prices, I believe he should do so. Mr. Delaney
    did not consider profitability to be the major consideration in
    determining his course of action to improve the companys
    financial situation. He was concerned more prominently with
    providing high-quality work to his customers. If he were to
    increase prices and sell some products at a loss, this will not
    necessarily always have a negative impact and may actually
    increase overall profit under certain situations, using a
    contribution pricing approach. A major fact he must consider
    with the option of raising prices is the pricing of his
    competitors. After Analyzing the initial consultants data on
    other dealerships, and believe he should raise prices enough
    to increase his sales to possibly fall between the No. 6 and
    No. 3 competitors. This analysis assumes that the demand
    for the

    body

    shops products

    and

    services

    remains constant. In order to gain a competitive advantage


    along with raising his prices, it would be important to focus
    on

    improving the

    quality

    of

    the

    body

    shop

    and

    overall service provided. Another suggestion would be that

    could increase profitability is to consider ways to reduce


    some of the body shops semi-variable costs.
    3.) It is important for Mr. Delaney to take a course of action
    that he is comfortable with. It is important to Mr. Delaney
    that his dealership provide high-quality body shop work to
    its customers and that if he leased the dealership it might
    provide below-standard service. Therefore, it is not a good
    option. Mr. Delaney should keep his dealership, but he needs
    to implement a system that provides a better analysis of the
    costs

    and

    allocates

    them

    more

    accurately

    to

    each

    department. Once he has done this, he should have a better


    understanding of his own costs and can then look at the
    competitors prices to make a more informed decision and
    identify areas where he could potentially cut costs. After he
    has this more reliable analysis he should raise prices if it is
    feasible to increase his profit and remain competitive as
    well.

    You might also like