Introduction
The purpose the report developed by Mr Constance’s accountant is to make informed business decisions by comparing profit figures from each sale. This is used to develop an understanding of Mr Constance’s profitability and develop new strategies, where needed, to overcome underperformance issues.
Current situation
Currently, Mr Constance employs one sales manager (Stephanie) and two sales executives (Franco and Jim) who all receive a commission based on the difficulty of car sold. Hatches and sedans at 3%, Commercial and four wheel drives at 4% and prestige cars at 5%.
In the month of January of 2013, Stephanie, Franco and Jim sell between 1-3 cars a day between them. In this month there have also been five low profit warnings, one of which resulted in a net loss of $566. In this instance, the net loss wouldn’t have occurred if the commission had not been paid to Franco.
Through the spread sheet it is also identifiable that Crazy Con’s Used Cars tends to sell hatch and prestige car models at a much faster rate than the other styles. While these two styles sell after an average of 4.5 and 5.7 days on market, there is raise for concern with the sedan and commercial models with the average days on market being at 20.4 days and a huge 155.8 days. With limited space in a car yard, having these models sit idle will mean that more hatch and prestige models will not be out for show which will lead to a much lower turnover rate.
Average profit made by the commercial and sedan vehicles is another issue. With average profits of $1709.68 for a commercial vehicle and $2347.32 for a sedan vehicle; hatch, four wheel drives and prestige vehicles are doing twice as well ranging in $4113.58 - $6267.75. This divide in the average profit made per vehicle brings notice to the fact that Mr Constance may not be using his resources effectively to purchase the vehicle