'Case Study for North Country Auto\r'

' eccentric Study for northernmost estate Auto, Inc. North Country Auto, Inc. was a franchised dealer and factory-authorized overhaul center for Ford, Saab, and Volkswagen. The accompany maintains its competitiveness by providing full advantages to its customers. For customers looking for a political machine, the North Country Auto not only provided options for overbold cars from those three brands, scarce also provided options to buy employ cars from it. In addition, for customers with cars, the company can provide a variety of helpings to their car, such as service and repair under stock warrant or at the customers’ expenses.\r\nExample service and repair work are active oil change, auto repair, the personate store work and auto damps supply. Recently, the company adapted a new manage system as a outline to improve its sales and increase its advantage. on that point were five subdivisions within North Country Auto: the new car discussion section, the used car surgical incision, the service subdivision, the part incision and the body shop. Origin on the wholey, these five segments operated as part of one business. And the performance of apiece department was not unmarriedly evaluated. Under the new tick system, all five departments operated as an individual wage center.\r\nThe owner mistaken that, by doing this, all managers of the five departments would be encouraged to increase their departments’ profit so as to have better paygrade and better income. However, under this new deem system, there were still problems needed to be dealt with, because the business conducted by these departments affected each other. In this case, if one department easily-tried to maximize its profit, it may affect the profit of other departments. For example, when the new car department manager tried to sell a new car, he would offer a very noble trade-in equipment casualty for the customer’s used car so as to attract th e customer.\r\nIf this high trade-in bell was divvy upd to other departments, it would be unavoidable that the cost of those departments would increase and their profit would decrease. Therefore, the questions raised from this case would be: should all departments be treated as an individual profit center; and how the direct expense should be set between the departments; as well as how to correctly allocate the cost among different departments. In my opinion, I gestate the parts department and the body shop should not be considered as the profit centers, since most demands for these two departments were from service department.\r\nIf these two departments tried to maximize their profit, it would be very difficult for the service department to maintain high profit. In my opinion, the parts department and the body shop should be considered as cost centers. In addition, the transfer toll among all departments should be the market place price sort of of another price determined internally. And any losses on inter-departmental business like trade-ins should be pro rata allocated to three profit centers: the new car department, the used car department and the service department.\r\nIn addition, under the current control system, the year-end bonus of each department manager was based on his/her department’s performance. The profit to be evaluated was the department’s gross profit instead of its net profit. This evaluation method may encourage all managers to focus on selling activities only. They may ignore other important responsibilities such as cost control or reduction, as well as inventory control. Therefore, I think the evaluation for each department’s performance should be based on the net profit. This would encourage the managers to be answerable for overall cost control and profit-making.\r\n'