Becky Hansen is the manager of American Autos. American Autos provides three types of services, Sales, Repairs, and Rebuilds. Becky needs to provide a profit analysis to the CEO at the end of the current fiscal year so the pricing and marketing strategies can be adjusted as needed. She has gathered the following information for the company. Instructions:
a.Allocate the support department costs to the operating units using the reciprocal method.
b. Calculate gross margin, operating income, and profit margin percentage for each operating unit after accounting for allocated costs.
c.Your local competitor, Wheels N More, is reporting a profit margin of 20% for its Repairs department. How much would American Auto's need to increase its total sales in the repair department to meet its competitor's profit margin?

Question

Becky Hansen is the manager of American Autos. American Autos provides three types of services, Sales, Repairs, and Rebuilds. Becky needs to provide a profit analysis to the CEO at the end of the current fiscal year so the pricing and marketing strategies can be adjusted as needed. She has gathered the following information for the company.  Instructions: 
a.Allocate the support department costs to the operating units using the reciprocal method.
b. Calculate gross margin, operating income, and profit margin percentage for each operating unit after accounting for allocated costs.
c.Your local competitor, Wheels N More, is reporting a profit margin of 20% for its Repairs department. How much would American Auto's need to increase its total sales in the repair department to meet its competitor's profit margin?

Quizplus · Accepted Answer

The Answer of Becky Hansen is the manager of American Autos. American Autos provides three types of services, Sales, Repairs, and Rebuilds. Becky needs to provide a profit analysis to the CEO at the end of the current fiscal year so the pricing and marketing strategies can be adjusted as needed. She has gathered the following information for the company.  Instructions: 
a.Allocate the support department costs to the operating units using the reciprocal method.
b. Calculate gross margin, operating income, and profit margin percentage for each operating unit after accounting for allocated costs.
c.Your local competitor, Wheels N More, is reporting a profit margin of 20% for its Repairs department. How much would American Auto's need to increase its total sales in the repair department to meet its competitor's profit margin?

Becky Hansen Is the Manager of American Autos