Case 17-1 - Exhibit 1

Frank Delaney owned and operated Delaney Motors, a General Motors automobile dealership in Ohio. Its operations consisted of new-car sales, used-car sales, parts sales, vehicle lease and rentals, vehicle service, and automobile consistence repairing and repainting. The dealership was profitable, earning almost 5 percent on sales, but the reported profit on the luggage compartment shop operation seemed low to Mr. Delaney. Consequently, he engaged a consultant to study the eubstance shop operation and suck recommendations. As a background for his study, the consultant took Mr. Delaneyâ??s info for the most recent year and made certain adjustments, shown in Exhibit 1 (attached). He explained them in the following paragraphs taken from his report: Most semi-variable costs contain a epoch-making portion of common costs. For example, the accountant performs many common service in order to maintain the corporate structure (e.g. preparing and file the dealerâ??s tax returns). The attorneys and the owner also snuff it much of their time providing general services. Although many of the expenses would not be significantly reduced if the owner sold certain departments, each(prenominal) department benefits from these expenses, and thus should be all(prenominal)ocated a portion of these costs.

The body shop, for example, should pay its proportionate share of accountantâ??s fees relating to the proviso and filing o the dealershipâ??s income tax returns. bid expenses and the fixed costs could properly be allocated to the departments if the necessary accompaniment were available. Since it is not, other cost allocation methods must be considered. A potentially controversial issue involves the ownerâ??s salary. The body shop manager could claim that because he exercises no reassure over the ownerâ??s salary, this cost should not be charged to his department. The owner puts his time and name in all aspects of the business, however, and his salary should be allocated accordingly.... If you want to get a exuberant essay, order it on our website: Orderessay

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