18Figure 3-3: Strategic Profit Model SalesGrossMarginCost of GoodsSoldNet ProfitNet ProfitMarginVariableExpensesSalesTotal ExpensesReturn on AssetsFixed ExpensesSalesInventoryAssetTurnoverCurrentAssetsAccounts ReceivableTotalAssetsFixedAssetsOther Current Assets
30Case 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
31Case 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
35Case 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?
36Case 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.
37Case 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?