Florida v. BuyGasCo Brief Essay

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I. Purposes of the Brief This brief amicus curiae does not address the merits of the predatory pricing allegation against BuyGasCo Corporation ("BuyGasCo"). It speaks only to the nature of the cost accounting system that we, as students of accounting, think to be appropriate for addressing the issues presented by cases of this general type. We offer our views on this subject out of concern about the allocation of indirect costs used in assessing the appropriate gasoline cost value in State of Florida v. BuyGasCo Corporation, 2003-05143 (D. FL. 2003). We regard the allocation system employed in that opinion to be inconsistent with systems in common practice. Use of that system has a potential adverse effect on both the motor fuel…show more content…
The invoice price by its nature can be directly attributable to each grade of gasoline at a per gallon rate. As such, this cost will be referred to as the "direct cost" for the remainder of this brief. On the other hand, labor and rent (also referred to as "indirect costs") cannot be directly attributable to each grade at a per gallon rate. It is the methodology of creating attribution rates for these indirect costs that is the point of contention between the parties. From the hearing, the plaintiff alleged that the indirect costs vary in direct proportion to the number of gallons of gasoline sold per month. Consequently, they allocated the costs based on the average amount of gasoline sold per month. The results of this approach were shown in Plaintiff's Exhibit A (Exhibit 1). Exhibit 1 Plaintiff's Exhibit A Calculation of Costs and Profits for BuyGasCo Corporation's Gasoline Products Prepared by Mr. Donohoe, CPA Regular Plus Premium Total Avg Monthly Gallons Sold 342,203 127,120 98,178 567,501 Percent of Total 60.3% 22.4% 17.3% 100.0% Avg Monthly Indirect Costs $20,006 $7,432 $5,739 $33,177 Cost Per Gallon $0.0585 $0.0585 $0.0585 Price Direct Cost Indirect Cost Profit(Loss) Premium $1.43 $1.22 $0.0585 $0.1515 Plus $1.36 $1.20 $0.0585 $0.1015 Regular $1.23 $1.18 $0.0585 ($0.0085) In contrast, the defendant stated that the resources that generated the indirect costs were used equally by each grade of gasoline.

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