allocation of fixed expense/absorption rate

[dodgeboy]

I AM HOPING SOMEONE CAN GIVE ME AN IDEA OF WHAT THE GENERAL GUIDLINES MIGHT BE FOR THE PERCENTAGE OF FIXED EXPENSES ALLOCATED TO EACH DEPT IN THE DEALERSHIP. I HAVE BEEN TRYING TO KEEP TRACK OF MY ABSORPTION, BUT MY GM HAS JUST BUMPED THE SERVICE DEPT PERCENTAGE BY 5% MORE. JUST WONDERING IF ANYONE MIGHT HAVE AN NADA GUIDLINE AVAILABLE?
p.s. DODGE-CHRYSLER FRANCHISE

[This message has been edited by dodgeboy (edited 04-02-2004).]

[CHEVYFIXEDOPSGUY]

do you have a body shop? much is considered into that question. I would first ask the size of your store. The dynamics of the operation is very important. Does your store do alot of frontend advertising? Does the Fixed operation have to fully support it or does it get prorated based on the overall contribution made to the backend. I would think Service 20% Body 10% Parts 10%, without a Bodyshop contribution S-30% P-10%
I have seen 18%serv 12%parts 6%body. So much depends on the situation in each store

[This message has been edited by CHEVYFIXEDOPSGUY (edited 04-14-2004).]

[scotstrong]

One of the "old school" formulas was to determine the total square footage of the building(s), and determine what percentage of the total is occupied by each department. That percentage would be the percentage of "all store" expense(s) charged to each individual department.

[kcatdeejay]

Another victim of creative accounting ! Scot's method is pretty well time tested and one which I always supported. Some years back I worked for a "creative accounting" type who simply put more weight on the bar of the dept with the biggest muscles. I started out at 18% of the fixed overhead expense, but by the time he was done I was at 30%.
New Car-25%
Body Shop-15%
Service-15%
Used Cars-15%
He rewarded non-performers and penalized those who excelled and based it solely on your ability to produce gross. Real good for morale and incentive isn't it?

[dodgeboy]

Thanks for your replies guys! I have no body shop here so I have to go it alone for the most part. Yes, it is getting distressing considering every time our GM comes back from one of his 20 group meetings and informs me that once again our shop "lost" money. No matter what we do, we can't seem to find the plus side of the fixed expense. Our service dept. sales and gross has increased every year since I took over 5 years ago, I'm kinda at a loss and considering giving up altogether! Thanks

[jazdale]

Whats you're fixed absortion percentage, and what was it 5 years ago?
(absorption = the % of the total fixed expenses that your gross can cover)

If your percentage went up, then you're doing your part...

...but if it goes down,
then you got some 'splaining to do.
or perhaps, the showroom looks like a palace.

I don't know the NADA average (little help someone), but I've seen 50 to 120%. Most high numbers were high-end, European cars.

I'm curious what would happen if you ran that calculation for all departments?
If you did - you could derive a fairer allocation - WITH PROOF!