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  • 5a-Profit Center Analysis

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    Daniele Astori
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    This document discusses how to analyze the profitability of different divisions, or profit centers, within a construction organization. It provides an example of allocating shared expenses like advertising, transportation, labor, and rent across profit centers. The example shows the income statement and profit for each center. It then analyzes whether dropping the least profitable appliance division would increase overall profit, but finds it would result in only a small gain and it's better to keep the division. The document demonstrates how to evaluate profit centers and allocate shared costs for management decision making.

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    Ganancia , Analisis central

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    This document discusses how to analyze the profitability of different divisions, or profit centers, within a construction organization. It provides an example of allocating shared expenses like advertising, transportation, labor, and rent across profit centers. The example shows the income statement and profit for each center. It then analyzes whether dropping the least profitable appliance division would increase overall profit, but finds it would result in only a small gain and it's better to keep the division. The document demonstrates how to evaluate profit centers and allocate shared costs for management decision making.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Download as pdf or txt
    11 views10 pages

    5a-Profit Center Analysis

    Uploaded by

    Daniele Astori
    This document discusses how to analyze the profitability of different divisions, or profit centers, within a construction organization. It provides an example of allocating shared expenses like advertising, transportation, labor, and rent across profit centers. The example shows the income statement and profit for each center. It then analyzes whether dropping the least profitable appliance division would increase overall profit, but finds it would result in only a small gain and it's better to keep the division. The document demonstrates how to evaluate profit centers and allocate shared costs for management decision making.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 10

    Management of Construction Organizations

    Profit Center
    Analysis

    Ayman Morad, Ph.D.


    Professor of Construction Management, FIU

    Profit/Cost Centers

    Cost
    Center
    Cost Cost
    Center Center

    Profit P fit
    Profit
    Center Center
    Profit
    Center

    1
    Example Balance Sheet

    Example Income Statement

    2
    Revised Income St. – Line Item Analysis

    Method of Expense Allocation

    3
    Distribution of Sales & Cost of Sales

    Percentage of Sales per Profit Center

    4
    Allocation of Advertising Expense

    Allocation of Auto & Truck Expense

    5
    Allocation of Indirect Labor & Fright Expense

    Allocation of Rent Expense

    6
    Allocation of Insurance Expense

    Income Statement by Profit Center

    7
    Profit by Profit Center

    Repairs
    9.44%

    New  Appliances
    Work ‐8.01%
    8 01% Should Rusty drop the 
    1.15% loser “Appliances” to 
    increase profit?

    Allocation without “Appliances”

    8
    Allocation of Rent (w/o Appliances)

    Allocation of Insurance (w/o Appliances)

    9
    Profit by Dropping Appliances

    Rusty’s Loss would be

    $3,650.00 

    (0.56%)

    It is better to maintain 
    the “Appliances  
    Division

    Profit by Profit Center (w/o Appliances)

    Rusty
    R t
    ‐0.56%

    Repairs
    1.50%
    New 
    Work
    ‐5.37%

    10

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