Supersonic Stereo, Inc.

People:
·         Pete Lockhart (National Sales Manager)
·         Bob Basler (Sales Manager - Atlanta district)
·         Stella Jordan (Executive)
·         Paul Sand (Sales representative)
·         Diane Gallo (Sales representative)
·         Kathy Parks (Sales representative)
·         Charlie Lyons (Sales representative)

Problem:

Total sales and profit for the Atlanta district, 1980-84

1980 1981 1982 1983

Total Sales $ 2,641,081 $ 2,445,120 $ 2,610,029 $ 2,514,113
Net Profit $ 13,873 $ 14,050 $ 15,381 $ 16,511

net profit
margin 5.45% 5.89% 5.52% 5.73%

% change
in sales 0% -7% 7% -4%

% change
in profit 0% 1% 9% 7%
Interpretation:
The sales and profits for the last five years has not met the
objectives. The table shows the growth from 1980-1984. It has been
able to achieve a sales growth of 7% in the year 1982, apart from
that the company is struggling to achiieve a higher sales growth.

Sales representative Charlie Lyons, a highly paid salesperson is asking for a raise or else he’ll le
 1984 net profit margin= net income/total sales
$ 2,638,340 Net income $ 144,000.00
$ 14,383

5.46%

5%

-13%

e years has not met the Coming to profits, the figure turns out to be negative in the year
wth from 1980-1984. It has been 1984, signifying the fact that Atlanta division is achieving a problem
in the year 1982, apart from for higher sales growth and profits.
hiieve a higher sales growth.

rson is asking for a raise or else he’ll leave the organization

Profit and loss statement, Atlant district, 1984

Sales
Cost of goods sold
Gross margin
Expenses
Salaries
Commissions
Advertising
Packaging
Warehousing and transportation
Travel expenses
Order processing
Rent
Total Expenses
Net profit (before taxes)

Allocation of natural accounts to functional accounts, Atlanta district

Functional

Selling Direct Selling Indirect

Natural Accounts Costs Costs
Salaries $ 177,000 $ 106,500 $ 47,500
Commissions $ 37,431 $ 37,431
Advertising $ 131,915
Packaging $ 43,642
Warehousing and transportation $ 76,374
Travel expenses $ 59,340 $ 57,340 $ 2,000
Order processing $ 770
Rent $ 83,000 $ 18,500
Total expenses $ 609,472 $ 201,271 $ 68,000

Product line sales and costs

Selling Price Gross Margin Number Sold in

Product per Unit Cost per Unit per Unit Period Sales in Period
 Receivers $ 250 $ 212 $ 38 3151 $ 787,750
Turntables $ 85 $ 64 $ 21 12079 $ 1,026,715
Speakers $ 125 $ 87 $ 38 6591 $ 823,875
21821 $ 2,638,340

Sales calls, orders, and units sold by Salesperson

Number of Units Sold

Number of Number of
Salesperson Sales Calls Orders Receivers Turntables Speakers
Paul Sand 85 60 668 2652 1534
Diana Gallo 105 85 823 3270 1582
Kathy Parks 110 60 816 3131 1578
Charlie Lyons 170 75 844 3026 1897
470 280 3151 12079 6591

Profitability Analysis of each sales rep

% share 23.00469484 25.82159624 24.4131455399 26.7605633803 100
Particulars Paul sand Diana Gallo Kathy Parks Charlie Lyons Total
Sales $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
Expenses
Salaries(direct) $24,500.00 $27,500.00 $26,000.00 $28,500.00 $106,500.00
Salaries(indirect) $10,927.00 $12,265.00 $11,596.00 $12,712.00 $47,500.00

salaries(order
processing) $2,760.56 $3,098.59 $2,929.58 $3,211.27 $12,000.00
salaries(packaging) $2,530.52 $2,840.38 $2,685.45 $2,943.66 $11,000.00
Commissions $8,362.08 $9,603.60 $9,403.38 $10,062.24 $37,431.30
Packaging $9,708.00 $11,350.00 $11,050.00 $11,534.00 $43,642.00
Advertising $29,208.50 $34,072.50 $33,369.25 $35,266.75 $131,917.00
Travel $10,731.70 $13,256.81 $13,888.09 $21,463.40 $59,340.00
Warehousing &
Transportation $16,989.00 $19,862.50 $19,337.50 $20,184.50 $76,373.50
Order prosessing $165.00 $233.75 $165.00 $206.25 $770.00
Rent $83,000.00
Total Expense $115,882 $134,083.13 $130,424.24 $146,084.07 $609,473.80
Net profit $23,485.64 $25,977 $26,298.76 $21,619.93 $14,381.20

Gross profit margin 24% 23% 23% 24% 24%

net profit margin 4% 4% 4% 3% 1%
 $3,000,000
Profitability Analysis of each

$2,500,000

$2,000,000

$1,500,000

$1,000,000

$500,000

$0

Paul sand Diana Gallo Kathy Parks Charlie

Interpretation: Though Charlie has more sales volumes but hit net profit contribution is less than that of K
Therefore on the basis of profitability analysis Charlie can denied a salary hike.
It can be seen that the net profit margin of the company is very low, and this is because of
than the overall net profit margin. An

Conclusion: Based on the calculations, Basler should not raise the salary for Charlie rather he should br

Customer activity analysis for Charlie Lyons

 Average Time
Customers of Charlie Number of Spent on Each Number of Number of Units Purchased
Lyons Sales Calls Call (minutes) Orders Receivers Turntables
American TV 65 55 40 422 1513
Appliance Mart 55 45 15 337 1058
Audio Emporium 50 45 20 85 455
170 145 75 844 3026

Average time
Customers of Charlie Number of spent with Direct selling
Lyons calls x each per customer
customer 4000
American TV 65 55 3575 3575
3500
3000
Appliance Mart 55 45 2475
2500
2000
Audio Emporium 50 45 2250
1500
1000
500
65 55
0
American
TV

Number of calls x
Direct selling per c

Customers of Charlie
Lyons Receivers Turntables Speakers Total
American TV 422 1513 854 2789 1600 1513
Appliance Mart 337 1058 569 1964 1400
Audio Emporium 85 455 474 1014 1200
1000
800
600
422
400
200
0
American
 600
422
400
200
0
American

American Tv is the biggest customer in terms of volume and sales

 2638340
2014485
623855

177000
37431
131915
43642
76374
59340
770
83000
609472
14383

Functional Accounts

Order
Processin Warehouse and
Advertising g Transportation Packaging
$ 12,000 $ 11,000

$ 131,915
$ 43,642
$ 76,374

$ 770
$ 4,500 $ 40,000 $ 20,000
$ 131,915 $ 17,270 $ 116,374 $ 74,642

Advertising
Expenditures Packaging
 $ 40,000 $ 6,302
$ 50,000 $ 24,158
$ 40,000 $ 13,182
$ 130,000 $ 43,642

Gross
Selling Price Cost per Margin
s Sold Product per Unit Unit per Unit

Total Receivers $ 250 $ 212 $ 38

4854 Turntables $ 85 $ 64 $ 21
5675 Speakers $ 125 $ 87 $ 38
5525
5767
21821

Working notes
sales number of units sold*selling price per unit(of all products
cost number of units sold*cost price per unit(of all products)
gross margin number of units sold*gross margin per unit(of all products)
Commissions 6% based on gross margin
Packaging No. of units *2

advertising 5% of sales dollars

total travel cost/no.of
Travel
warehousing & calls*individual call 59340
transportation No. 0f units*3.50 3.5
order processing no. of orders*2.75 2.75
net profit gross margin-total expense
Gross margin total sales-cost(formula)
Gross
Selling Price Cost per Margin
Product per Unit Unit per Unit
Receivers $ 250 $ 212 $ 38
Turntables $ 85 $ 64 $ 21
Speakers $ 125 $ 87 $ 38
Analysis of each sales rep

Gallo Kathy Parks Charlie Lyons Total

tion is less than that of Kathy. Charlie expenses are high which lowers his net profit contributions.
a salary hike.
w, and this is because of the fact that their expenses are high. However, the individual net profit margin is more
rall net profit margin. And charlie has the lowest NP margin.

harlie rather he should bring the fact into Charlie's notice that his expenses is causing net loss.
ber of Units Purchased
Speakers Total
854 2789
569 1964
474 1014
1897 5767

Direct Selling
0
3575
0
0
2475
0 2250
0
0
0
0
65 55 55 45 50 45
0
American Appliance Audio
TV Mart Emporium

Number of calls x Average time spent with each customer

Direct selling per customer

No. of units purchased

1600 1513
1400
1200
1058
1000
854
800
569
600 474
422 455
400 337

200 85
0
American TV Appliance Mart Audio Emporium

Receivers Turntables Speakers

600 474
422 455
400 337

200 85
0
American TV Appliance Mart Audio Emporium

Receivers Turntables Speakers