Accounting Control and Financial Strategy: A Casebook by Andrew M. McCosh, Michael J. Earl

By Andrew M. McCosh, Michael J. Earl

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Sample text

This, combined with elose attention to customer relations so that a substantial amount of repeat business was available, had increased the company's sales to a new high level. Therefore, he wanted to make organisational changes to cope with the new situation. Mr Bultman's three 'silent partners' agreed to this decision. Accordingly, Mr Bultman divided up the business into three departments: a new car sales department, a used car sales department, and the service department. He then appointed three ofhis most trusted employees managers ofthe new departments:John Ward was named manager ofnew car sales, Marty Ziegel was appointed manager of used car sales, and Charlie Lassen placed in charge of the service department.

These commitments are not at aIl abnormal in the oil tanker chartering business. All large oil companies must make provision for the transhipment of their product. However, most ofthe larger oil companies simply work out how many ships they will need and buy (or charter) sufficient to meet their own anticipated requirements. They do not go into the short-term chartering ofthese vessels except where essential to meet short-term fluctuations in demand. NaturaIly, the capital involved is great and the time periods are so long that it is difficult to do these calculations correctly in an inflationary period.

IfI did work costing $350 for an outside customer, I would be able to charge hirn about $475 for thejob. The Blue Book gives a range ofS460 '490 for the work this car needs, and I have always aimed for the middle ofthe Blue Book range. That would give my department a gross profit oU I 25, and my own income is based on that gross profit. Since it looks as if a high proportion of the work of my department is going to be reconditioning of trade-ins for resale, I figure that I should be able to make the same charge for repairing a trade-in as I would get for an outside repair job.

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