Coco's corporate strategy along with reducing unnecessary costs for advertising. The plaintiff, the State of Florida, utilizes an approach which allocates indirect costs to the three deferent grades of gasoline based on the average amount of gasoline sold from each grade. On the other hand, the defendant, Buybacks, utilizes an approach in which the indirect costs are allocated using a simple average approach, which allocates the same cost to each grade, regardless of volume sold. The difference In approaches provides for a difference In Indirect costs for each grade of gasoline.
This poses a problem because the Florida Motor Fuel Marketing Practices Act (FMP) prohibits gas companies from selling gasoline at retails prices that are below "cost.
" If gas companies are believed to be participating in such practices, then they will be accused of predatory
...pricing. Utilizing the plaintiffs costing approach yields the result of Buybacks selling gasoline for less than Its cost as a competitive advantage. The Judge's Ruling During the initial hearing, the Judge's preliminary ruling was in agreement with the alienists costing approach, citing that it seems to determine the gasoline costs more accurately.
The Judge chose the plaintiffs costing approach over the defendant's because It provides a more precise connection between the Indirect costs and each of the three grades of gasoline.
On the other hand, Bugaboo's simple average method merely allocates the cost to each grade equally, without taking into consideration the how much of each grade was sold. Because this method seems to be less accurate, the Judge decided to agree with the plaintiff. Although agreement goes not Indicate that one method of cost analysis Is better than th
other. Dry.
Humboldt includes a kiosk in his analysis because Buybacks identifies housing attendants as a primary activity involved in selling gasoline. Furthermore, Buybacks also states that a kiosk is required to house these gasoline sales attendants.
Therefore, in order to establish true costs of selling gasoline, kiosks must be considered because it houses the sales attendants that are needed in order to sell gasoline. Cost Hierarchy In a cost hierarchy, activities are classified into four categories: unit-level, batch-level, reduce-level, and organizational-level.
A unit-level activity occurs each time a unit of product is produced. An example off unit-level activity would be the cost of the actual crude oil needed to make gasoline. Batch-level activities occur for each batch of product that is produced. In this case, labor and kiosks would be examples of costs related to batch-level activities.
Product-level activities are specific to the product being produced. An example would be equipment used specifically for each grade of gasoline. Organizational-level activities maintain general capabilities.
An example of a cost in this case that is associated with organizational-level activities is rent. Dry. Humboldt BBC Analysis Dry.
Humboldt analysis of the data provided by Buybacks using the Activity-Based Costing (BBC) method, yields results that seem to be a mixture of what the plaintiff and defendant had initially determined. The reasoning behind this outcome is because in the BBC method, what Dry. Humboldt does is, similar to the plaintiffs method, he determines that the costs should be associated with each grade of gasoline based on the volume sold.
So what he does is he identifies the different activity costs pools and determines Just how much of each of these activity cost
pools can be attributed to each grade of gasoline: regular, plus, and premium.
However, Nat drives the cost for each grade down in comparison to the plaintiffs findings is the different activity drivers as shown in Exhibit 9 of the case. Recommendation/Conclusion In conclusion, I believe that in the matter of Justice and pursuing all that is correct, the injunction should be lifted.
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