Case Study for North Country Auto

Case Study for pairing Country Auto, Inc. North Country Auto, Inc. was a franchised dealer and factory-authorized suffice concentrate for Ford, Saab, and Volkswagen. The company maintains its competitiveness by providing full function to its customers. For customers looking for a car, the North Country Auto not only provided options for sensitive cars from those three brands, barely also provided options to buy used cars from it. In addition, for customers with cars, the company can provide a variety of work to their car, such as assistance and repair chthonian warranty or at the customers expenses.Example service and repair work are quick oil change, motorcar repair, the proboscis shop work and auto bumps supply. Recently, the company adapted a recent control system as a dodge to improve its sales and increase its shekels. There were five departments within North Country Auto the new car department, the used car department, the service department, the parts department and the body shop. Origin eithery, these five departments operated as part of one business. And the performance of individually department was not individually evaluated. Under the new control system, all five departments operated as an individual profit center.The owner assumed that, by doing this, all managers of the five departments would be encouraged to increase their departments profit so as to have better evaluation and better income. However, under this new control system, there were still problems needed to be dealt with, because the business conducted by these departments affected each other. In this case, if one department tried to maximize its profit, it whitethorn affect the profit of other departments. For example, when the new car department manager tried to sell a new car, he would offer a very high trade-in price for the customers used car so as to attract the customer.If this high trade-in cost was assignd to other departments, it would be unavoidable that the co st of those departments would increase and their profit would decrease. Therefore, the questions raised from this case would be should all departments be treated as an individual profit center and how the transfer price should be set between the departments as comfortably as how to correctly allocate the cost among different departments. In my opinion, I think the parts department and the body shop should not be considered as the profit centers, since most demands for these two departments were from service department.If these two departments tried to maximize their profit, it would be very difficult for the service department to maintain high profit. In my opinion, the parts department and the body shop should be considered as cost centers. In addition, the transfer price among all departments should be the foodstuff price quite of another price determined internally. And any losses on inter-departmental business similar trade-ins should be proportionally allocated to three pro fit centers the new car department, the used car department and the service department.In addition, under the current control system, the year-end bonus of each department manager was ground on his/her departments performance. The profit to be evaluated was the departments gross profit instead of its net profit. This evaluation method may encourage all managers to focus on selling activities only. They may ignore other important responsibilities such as cost control or reduction, as well as inventory control. Therefore, I think the evaluation for each departments performance should be based on the net profit. This would encourage the managers to be responsible for overall cost control and profit-making.