To analyze the result of the study of the application of the cost allocation and links its impact on the capacity of the product line to contribute earnings to the overall profitability of the dealership. To explore the viability of the options suggested by the consultant to achieve profitability of Delaney Motors. AREAS OF CONSIDERATION:
COST ACCOUNTING SYSTEM
A cost accounting system accumulates costs used in manufacturing products or providing services. The cost accounting system of Delaney Motors revealed that most of its semi-variable costs contain a significant portion of the dealership’s common costs. This goes to show either the deficiency or absence of a suitable cost allocation method for its type of business. Inasmuch as the allocation base of the semi-variable costs was already pointed out in the case, there is still a need to consider the same in order to address the one of the implied proposals of changing the present set up to more accurately reflect each department’s use of dealership resources. At present, body shop does away with some of the company’s common costs, which could have prevented the better appraisal of its departmental and managerial performance. Furthermore, this provides us with an initial analysis that Body Shop could have a much lower profit that what it appeared to be. PRODUCT AND MARKET SITUATION
The shop is competing against other 11 dealerships in Ohio. It ranks between 6th to 9th places in terms of sales per exhibit 1. PROFITABILITY
ALTERNATIVE COURSES OF ACTION:
Increase marketing effort and improve the cost accounting system of Body Shop As mentioned earlier, the cost accounting system is used to accumulate costs in providing service or manufacturing products. The cost accounting is used by management to determine proper service costs, to support product pricing decisions, and to...