Management: Cost Accounting and North Country Auto

2199 WordsNov 14, 20109 Pages
Case Analysis Questions Patten Corporation I find this a very rich case that makes for a great introduction to my course. To get the most out of it, you need to spend some time thinking about what the company does. Read the case carefully. 1. What does Patten Corporation do? What does it buy? What goods or services does it sell? How does Patten make money? 2. Is Patten profitable or unprofitable? If it is profitable, what does the company do that makes it profitable? If profitable, is it likely to remain profitable? If not profitable, why not? If not profitable, will it ever become profitable? Why or why not? Is it cash flow positive or cash flow negative? If cash positive, why? Is it likely to remain cash…show more content…
North Country Auto, Inc. This tiny little business has all of the complexities of the largest corporations. You can learn a lot from studying this simple firm. 1. How do you think car retailers like North Country Auto make money? If you ran North Country Auto, what would you focus on? What would be critical success factors? 2. The case describes a typical car transaction: North Country sold a new 1989 Volkswagen Jetta for $14,150. To pay for this, the buyer paid $2,000 cash, traded in an old 1984 Jetta for a trade-in allowance of $4,800, and arranged financing (through a bank) for the balance of $7,350. North Country paid VW $11,420 for the 1989 Jetta (including the sales commission paid to the NorthCountry salesperson who sold the car). a. Assume the 1984 Jetta was sold — without any repairs or improvements — to a buyer for $5,200. That buyer paid for the car by paying $3,500 cash, and trading in a 1980 VW Jetta for a trade-in allowance of $1,700. North Country then sold the 1980 Jetta at auction for $1,500. How much money did North Country Auto make on each of the 1989 Jetta, the 1984 Jetta and the 1980 Jetta? b. The case states that the “guidebook” value of the 1984 Jetta was $3,500 at wholesale. In other words, if the 1984 Jetta were sold at auction, North Country Auto could reasonably expect to receive $3,500 for it. But, the dealership sold it at retail for $5,200. How should the profit on the 1984 Jetta be
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