Requirements:

1 Calculate the following:

Free on Board FOB
Cost and Freight C&F
Cost Insurance and Freight CIF
Free into Store FIS

2 Calculate the Final SP to the Australian Buyer (Inclussive of GST) and the percentage of price escalation
as against the SP of car in Korea.

3 Make recommendations as to how the K-Pop company can make the GenX more price competitive
in the Australian market, and dangers involved in some of the recommendations provided to reduce
prices.

Option 1: To streamline/ shorten distribution channel to eliminate costs.

Option 2: Consider manufacturing in Australia.

*** Sensitivity Analysis: Calculate the profit margin that K-Pop will have to accept if it wants the cars to sell
in Australia to customers for approx. $120,000 (End-User price).
 Domestic Foreign
market Market with If sell eport
Example with GST/Vat on directly to
Sales tax Selling Price Retailers
Material (Variable) 10,000
Var Conversion Costs 5,500
Total Variable Costs 15,500
Fixed Conversion Costs 14,500
Total Costs 30,000 30,000 30,000
Local freight to ship 1,000 1,000
e escalation FOB 31,000 31,000
Freight 2,000 2,000
C&F 33,000 33,000
Insurance 500 500
CIF 33,500 33,500
Turnover tax (10% GST) 3,100 3,100
Import Taxes and Tarif (20% of CIF) 6,700 6,700
Clearance fee 500 500
Local Freight to importer's warehouse 1,000 1,000
Importer pays (FIS) 44,800 44,800
Importer margin when transferred
to state franchise (25%) 11,200
GST Rebate (3,100)
Turnover tax - 10% GST 5,600
State Franchise pays (Wholesaler) 58,500
Wholesaler markup when
transferred to retailer (30%)(25%) 9,000 14,625
Turnover tax GST (10%) 3,900 7,313
GST rebate - (5,600)
Retailers pay 42,900 74,838 44,800
Retailer's markup when sold to
customer (50%) 37,419 22,400
turnover tax GST 10% 11,226 6,720
Tax rebate GST (7,313) (3,100)
Total Selling Price 42,900 116,169 70,820
% Increase on domestic price 1.71 0.65
Supersonic:
1 Prepare a profitability analysis for each sales representative.
2 Prepare profitability analysis for Charlie Lyon's customers
3 Do you agree with the way functional costs were allocated? What changes
would you recommend?
4 How would you handle Charlie Lyon's request for more money?
5 Should the sales force be paid according to their contribution to profit instead
of gross margin?
6 What are the implications of paying commissions only after quota has been reached?

1 Paul Sand Diane Gallo Kathy Parks Charlie Lyons Total

Sale 584,170 681,450 667,385 705,335 2,638,340
Cost 444,802 521,390 510,662 537,631 2,014,485
Gross Margin 139,368 160,060 156,723 167,704 623,855

Salaries (Direct) 24,500 27,500 26,000 28,500 106,500

Salaries (Indirect) 10,927 12,265 11,596 12,711 47,500
Sal Order processing 2,571 3,643 2,571 3,214 12,000
Sal Packaging 2,447 2,861 2,785 2,907 11,000
Commissions 8,362 9,604 9,403 10,062 37,431
Travel 10,732 13,257 13,888 21,463 59,340
Advertising 29,209 34,073 33,369 35,267 131,917
Packaging 9,708 11,350 11,050 11,534 43,642

Warehousing and transportation 16,989 19,863 19,338 20,185 76,374

Order processing 165 234 165 206 770

Total Expense 126,960 146,182 130,166 146,050 526,474
Rent 83,000
Net Profit 12,408 13,878 26,557 21,654 14,381

Gross Profit Margin 24% 23% 23% 24% 24%

Net Profit Margin 2% 2% 4% 3% 1%

Appliance Audio
American TV
2 Mart Emporium
Sales 340,855 245,305 119,175
Cost 260,594 188,659 88,378
Gross Margin 80,261 56,646 30,797

Direct selling (minutes) 3,575 2,475 2,250

Commission 4,816 3,399 1,848
Travel 8,207 6,944 6,313
Advertising 17,043 12,265 5,959
Packaging 5,578 3,928 2,028
 Warehouse and transportation 9,762 6,874 3,549
Order and processing 110 41 55
Total Expense 45,515 33,451 19,751

Net Profit 34,746 23,195 11,046

Gross Profit Margin 0 0 0

Net Profit Margin 0 0 0

3 ·       Based on the data and the guidelines formulated by Stella Jordan and Bob Basler the functional co
·       Some of the Functional cost items (FCIs) can be better allocated:
·       Direct selling lacks data for other salesperson's customers
·       Travel cost should take in the average distance travelled for orders from customers.
·       Packaging should also take into account the dimensions and weight of the products.
·       Similarly for warehousing and transportation
·       I would suggest Activity Based Costing for FCIs instead of taking average costs.
n and Bob Basler the functional cost focus on both order getting and order filling costs.

rs from customers.
ght of the products.

average costs.