$8$:$45$

$75$

CASE

CASE $3\mathrm{.}1$ BRANT FREEZER COMPANY

Located in Fargo, North Dakota, the Brant Freezer Company manufactures industrial freezers. These freezers come in one size and are distributed through public warehouses in Atlanta, Boston, Chicago, Denver, Los Angeles, Portland, and St$.$ Louis. In addition, some space is used in the company's Fargo warehouse. Young Joaquin $($J$.$ Q$.)$ Brant, with a fresh MBA degree from the University of South Alabama, returned to the family firm, where he had once worked during summers. On his first day of work, J$.$ Q$.$ met with his father. His father complained that they were being "eaten alive" by warehousing costs. The firm's controller drew up a budget each year, and each warehouse's monthly activity $($units shipped$)$ and costs were tallied.

Exhibit $3.$A shows actual $2016$ figures for all warehouses, plus actual figures for the first five months of $2017.$ Projected $12-$month $2017$ budgets and shipments are also included. Exhibit $3.B$ shows the Income Statement for $2016.$ Exhibit $3.$Cis the $2016$ Balance Sheet. If you are familiar with Excel or other spreadsheet software, you might try using it to answer the following questions.

QUESTIONS

When comparing performance during the first five months of $2017$ with performance in $2016,$ which warehouse shows the most improvement?

When comparing performance during the first five months of $2017$ with performance in $2016,$ 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?

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 $2017$ 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 $2017.$ Do his work for him.

When comparing the $2016$ figures with the $2017$ figures shown in the table, the amount budgeted for each warehouse in $2017$ was greater than actual $2016$ costs. How much of the increase is caused by increased volume of business $($units shipped$)$ and how much by inflation?

Use the $2016$ Income Statement and Balance Sheet to complete a Strategic Profit Model for J$.$ Q$.$

Holding all other information constant, what would be the affect on ROA for $2017$ if warehousing costs declined $10\%$ from $2016$ levels?