18 Figure 3-3: Strategic Profit Model SalesGrossMarginCost of GoodsSoldNet ProfitNet ProfitMarginVariableExpensesSalesTotal ExpensesReturn on AssetsFixed ExpensesSalesInventoryAssetTurnoverCurrentAssetsAccounts ReceivableTotalAssetsFixedAssetsOther Current Assets
30 Case 3-1 Brant Freezer Co. Company Facts: Located in Fargo, N. Dakota Product Facts:Industrial freezers (one size)Market Facts:Distributed through public warehouses in Atlanta, Boston, Chicago, Denver, Los Angels, Portland, and St. LouisFargo warehouse
31 Case 3-1 Brant Freezer Co. 2009 Units Shipped Warehouse Costs 12 mo. Atlanta17,4314,080$156,830$35,890Boston6,9203,061$63,417$27,915Chicago28,10414,621$246,315$131,618Denver3,0211,005*$28,019$8,600*Fargo2,016980$16,411$8,883LA16,49111,431$151,975$109,690Portland8,3334,028$73,015$36,021St. Louis5,9212,331$51,819$23,232* Denver warehouse closed by strike march 4-19, 2009
32 Case 3-1 Brant Freezer Co. 2,010 Units Shipped Warehouse Costs 12 mo. Atlanta18,0007,035$178,000$40,228Boston7,2003,119$7,300$29,416Chicago30,00015,230$285,000$141,222Denver3,1001,421$31,000$14,900Fargo2,000804$17,000$9,605LA17,0009,444$176,000$93,280Portland9,0004,600$85,000$42,616St. Louis8,0002,116$56,000$19,191
33 Case 3-1 Brant Freezer Co. Income Statement 2009 Sales $ 4,003,450 $ 4,003,450Cost of Goods Sold$ ,000Gross Profit Margin$ 3,066,450Transportation Cost$ ,322Warehousing Cost$ ,982Inventory Carrying Cost$ ,987Other Operating Costs$ ,876Total Operation Costs$ 2,307,167Earnings before interest and taxes$ ,283Interest$ ,000Taxes$ ,000Ne Income$ ,283
34 Case 3-1 Brant Freezer Co. Balance Sheet 2009 Assets Liabilities Cash $706,034Current Liabilities$1,678,589Accounts Receivable$355,450Long-term Debt$398,060Inventory$1,590,435Total Liabilities$2,076,649Total Current Assets$2,651,919Shareholders' Equity$1,378,326Net Fixed Assets$803,056Total Liabilities and Equity$3,454,975Total Assets
35 Case 3-1 Brant Freezer Co. Questions When comparing performance during the first five months of 2010 with performance in 2009, which warehouse shows the most improvement?When comparing performance during the first five months of 2010 with performance in 2009, which warehouse shows the poorest change in performance?When comparisons are made among all eight warehouses, which one do you think does the best job for the Brant Company? What criteria did you use? Why?
36 Case 3-1 Brant Freezer Co. Questions J. Q. is aggressive and is going to recommend that his father cancel the contract with one of the warehouses and give that business to a competing warehouse in the same city. J. Q. feels that when word of this gets around, the other warehouses they use will “shape up.” Which of the seven should J. Q. recommend be dropped? Why?The year 2010 is nearly half over. J. Q. is told to determine how much the firm is likely to spend for warehousing at each of the eight warehouses for the last six months in Do his work for him.
37 Case 3-1 Brant Freezer Co. Questions When comparing the 2009 figures with the 2010 figures shown in the table, the amount budgeted for each warehouse in 2010 was greater than actual 2009 costs. How much of the increase is caused by increased volume of business (units shipped) and how much by inflation?Use the 2009 income statement and balance sheet to complete a Strategic Profit Model for J. Q.Holding all other information constant, what would be the effect on ROA for 2010 if warehousing costs declined 10 percent from 2009 levels?