1. Business: 6020
Terrance Sanford
Bradley Ross

2. 2

3.  Adding the Ducati and BMW models would
add an estimated $49,791 of additional
annual profit to RK Industrial Corporation.
3

4.  Some equations
 Units sales x ave sales price = revenue
 Revenue x GPM = gross profit
 Current profit
 225 x $12,320 = $2,772,000 Revenue
 $2,772,000 x .05 = $138,600 gross profit
 Number of sale required to make same profit with a
2% reduction in GPM
 $138,600 / .03 = $4,620,000 Revenue
 $4,620,000 / $12,320 = 375 unit sales
 Bottom line – Bad Idea
 We would have to sell an additional 150 Yamahas to make
the same profit due to a reduction in the GPM to 2%.
4

5.  Using Yamaha local sales figures as our base and comparing it to
the national average gives an estimate as to the number of units
anticipated to sale in the future for each product line.
Yamaha: 225 motorcycle units locally
620,000 national units
0.04% local % Yamaha units
or base % of local units
Triumph:37,800
national
units Ducati:30,100
national
units BMW:47,700
national
units
0.04%
local % of national
sales 0.04%
local % of national
sales 0.04%
local % of
national
sales
15
estimated unit
sales 12
estimated unit
sales 19
estimated
unit sales
Yamaha
nat'l
units
620000
X
solve for "X“
(BMW national
units)
Yamaha
mkt
share 16.9% 1.3% mkt share BMW
X =
47,692.31
or 47,700
5
Estimated market share annual sales for each new product line are:

6. Yamaha Triumph Ducati BMW
Profit = Revenue - Costs Profit = Revenue - Costs Profit = Revenue - Costs Profit = Revenue - Costs
5.00% Reveune - Costs 7.50% Reveune - Costs 15.00% Reveune - Costs 10.00% Reveune - Costs
$616 12,320 Costs $855 11,399 Costs $2,174 14,495 Costs $1,247 12,470 Costs
$616 12,320 11,704 $855 11,399 10,544 $2,174 14,495 12,321 $1,247 12,470 11,223
Yamaha Triumph Ducati BMW
Profit per Unit $616 $855 $2174 $1247
Estimated Unit
Sales 225 15 12 19
Total Gross Profit $138,600 $12,825 $26,088 $23,693
Estimated annual sales and profits for each of the product lines are:
Ducati returns the best profit per unit sale followed by BMW based on projected local
market share sales
6
The calculations are based off the sale of one unit at the average cost for each brand.

7.  Credit Line Considerations
 Principles of Production Possibilities Curve
Total Line of Credit $500,000 New Product Credit Line Required
Yamaha motorcycles and scooters $225,000 Triumph $85,000
Yamaha four-wheel ATVs $75,000 Ducati $70,000
Polaris watercraft $65,000 BMW $50,000
Line of Credit Remaining $135,000
7
Ducati
Triumph
Not a possible combination
BMW
Ducati
Credit Line Use = $120,000
Profit = $49,781
BMW
Triumph
Credit Line Use = $135,000
Profit = $36,518
BAD OK BEST
NOTE: The x and y axis’ represent the
Line of Credit usage for each Brand

8.  Credit Line Considerations (Floor-plan
Financing)
 Adding both Ducati and BMW to the RKIC product
offerings would maximize sales and profits.
Based on the credit line limitations we could
have no more than 5 Ducati’s and 4 BMW’s on the
floor at one time.
 The additional annual profit for RKIC
 $49,781
8

9. 9

10. Activity
Activity
Cost Driver
Activity Cost
Driver Rate
Perform
Repairs
$20,525 Repairs
Completed 325 Cost per Repair $63.15
Diagnose
Problems
$6,750 Problems
Diagnosed 845
Cost Per
Diagnoses $7.99
Generate
Repair
Orders
$1,650 Repair
Orders
Generated 345
Cost to
generate each
repair order $4.78
Counter Idle
Time
$2,600 Hours of
Counter
Idle Time 52
Cost per hour
of counter idle
time $50.00
Maintain
Service Area
$2,425 Hours
Maintaining
Service
Areas 242.5
Cost per hour
maintaining
service area $10.00
Store
Vehicles
$3,550 Vehicles
Stored 420
Cost per
vehicle stored $8.45
Process
Service
Documents
$1,644 Service
Documents
Processed 137
Cost to process
each service
document $12.00
TOTAL $39,144
10

11. ABC Pro-Forma P&L
As-Is ABC
Revenue $82,543
Direct Labor $12,315
Materials/Parts $8,210
Gross Margin $62,018
Diagnose Problems $6,750
Generate Repair
Orders $1,650
Counter Idle Time $2,600
Maintain Service
Area $2,425
Store Vehicles $3,550
Process Service
Documents $1,644
Total Activity
Expense $18,619
Operating Profit $43,399
Profit Percent 52.58%
11

12.  The main areas that need addressing are the
Diagnose Problems, Counter Idle Time, and
Store Vehicles.
 Diagnostic represents the 2nd largest service
expense.
 Idle time is never good as it usually means
product/services are sitting between cycles.
 Vehicle storage process is the 3rd highest
expense.
12

13.  Diagnostics could stem from poor quality parts on
motorcycles or perhaps consumers are not educated
on how proper maintenance.
 Talk with the service manager and list out the most
common diagnosed problems to see if the issue is related to
workmanship or poor consumer up-keep.
 Counter Idle Time should be investigated to see why
there is a wait time between processes.
 Does the equipment need to be updated?
 Are workstations set to far apart?
 Is there excessive setup time due to one machine doing
multiple tasks?
 Would a JIT system benefit the company?
13

14.  Store Vehicle Process
 Talk with the service manager about any delays
between finished repairs and customer pickup.
 Are we allowing excessive days for customers to pick
up his/her motorcycles?
 Is so, should a per day fee be charged?
 Is there an area being used to house old motorcycles
for parts after there is a trade in?
14

15.  Sample Cost Reduction Strategy
 Option 1: Reduce TAE by conducting
process improvement
 Option 2: Use historical data of Total
Activity Expenses to increase repair
revenue by 25% of Total Activity
Expenses.
 Option 3: Use a hybrid of Options 1
and 2 (find efficiencies and increase
revenue based on local area
competitive prices).
 The math for options 1 through 3
 TAE x 25% = TAE reduction from
process improvement or repair
revenue increase
 $18,619 x .25 = $4,655
15
Note: Options 1 and 2 are used to illustrate the effects on gross marginal profit if $4,655 was saved in costs
due to finding efficiencies (option 1) or if solely passed on to customers as an additional charge (option 2).
ABC Pro-Forma P&L
As-Is ABC Option 1 ABC Option 2 ABC Option 3 ABC
Revenue $82,543 $82,543 $87,198 $87,198
Direct Labor $12,315 $12,315 $12,315 $12,315
Materials/Pa
rts $8,210 $8,210 $8,210 $8,210
Gross Margin $62,018 $62,018 $66,673 $66,673
Diagnose
Problems $6,750 $5,062 $6,750 $5,062
Generate
Repair
Orders $1,650 $1,238 $1,650 $1,238
Counter Idle
Time $2,600 $1,950 $2,600 $1,950
Maintain
Service Area $2,425 $1,819 $2,425 $1,819
Store
Vehicles $3,550 $2,662 $3,550 $2,662
Process
Service
Documents $1,644 $1,233 $1,644 $1,233
Total
Activity
Expense $18,619 $13,964 $18,619 $13,964
Operating
Profit $43,399 $48,054 $48,054 $52,709
Profit
Percent 52.58% 58.22% 55.11% 60.45%

16. 16

17. Increase Revenue Increase Production
Raising Prices Sale More of Existing
Products
Increase Customer Value Adding New Product
Line(s)
17

18. GUIDE FOR SUCCESS: INCREASE REVENUE
18
Strategic
Objective Initiative Measure Target
Increase revenue by
raising prices
Research market to
compare prices. Assess
demand base of proposed
price increase
Competitiveness of
product and service
prices
Product and service
prices within 5% of
competitor prices
Evaluate ways to
increase customer
satisfaction
Service Department
satisfaction surveys Customer Satisfaction
Greater than 95%
satisfaction in all
categories
Courtesy calls to customers
one month after purchase Number of calls made
100% contact with
customers

19. GUIDE FOR SUCCESS: INCREASE PRODUCTIVITY
19
Strategic
Objective Initiative Measure Target
Increase production
through introduction
of new product line
Increase product line: Best
option - add Ducati and
BMW
Increase annual sales
based on profitability
Achieve 100% of sales
goals for each product
each year
Determine potential
outcome of selling
more of existing
product line
Calculate the gain/loss of
market share Market Share
Increase market share
annually by 5%
Marketing campaign to
widen name recognition Increase of annual sales
Increase annual sales by
20%

20. Customer satisfaction Repeat customers
Increase market value Attract new customers
20

21. GUIDE FOR SUCCESS: INCREASE CUSTOMER
SATISFACTION/NAME RECOGNITION
21
Strategic
Objective Initiative Measure Target
Increase customer
satisfaction in the
motor sports market
Perform studies on the
useful life of product.
Contact past purchasers to
determine satisfaction and
likelihood of repeat
purchase.
Number of repeat
customers
Increase repeat
customers annually by
25%
Increase name
recognition in the
region to attract new
customers
Develop market strategy to
include random surveys to
potential buyers asking
what shopping experience
brings them to a showroom
Number of new
customers
Increase new customers
annually by 30%

22. Relationship w/Suppliers Efficient service department
Customer management
22

23. GUIDE FOR SUCCESS: INCREASE OPERATIONAL
EFFICIENCY/INVEST IN INNOVATION
23
Strategic
Objective Initiative Measure Target
Decrease costs for
vehicle storage
Per day fee for vehicle
storage after repairs
complete
Customer vehicle pick
up rate
95% of vehicles picked
up by customer within
three days of repairs
Research diagnostic
problems for
commonalities
Talk with suppliers
concerning quality of
products Part quality
Reduce failures of
commonly failing
products by 40%
Increase customer
satisfaction with the
service department
Provide care information
pamphlets and care clinic
tip videos in waiting room
Pamphlet and video
availability
100% availability during
normal working hours
Obtain/Maintain
highly skilled
technicians and
salesmen
Technicians and sales staff
are properly trained and
certified Percent of qualified staff
95% of staff fully trained
and certified

24. Employee Knowledgeable People
Cost-Benefit Analysis on Equipment
Understand Organizational Culture
Market Analysis on Product Line
24

25. GUIDE FOR SUCCESS: MAINTAIN/INCREASE VALUE FOR
CONTINUED GROWTH
25
Strategic Objective Initiative Measure Target
Assess Cost-Benefit of
replacing equipment
Measure whether new
equipment would decrease idle
time between processes Service throughput 25% reduction in repair times
Administration throughput
95% reduction in
administrative errors
60% increase in
administrative efficiency
Knowledgeable
staff/continuing
education
Provide staff with continuing
education opportunities
Staff enrolled in continuing
education events 85% enrolled
Introduce pay for performance
or gain sharing rewards Employee productivity
25% annual increase in
employee productivity
Increase knowledge base
of motorcycle
enthusiasts
Talk with motorcycle
owners/understand needs to
shape organizational policy
Number of employees able
to make customer service
decisions that are in the
best interest of the company
and the customer
100% of management staff
trusted to make sound
customer service decisions
Thorough understanding
of product lines
Employee attendance at
conventions and conferences.
Key employees attend and return
to train remaining staff Product familiarity
100% of employees familiar
with product lines

26. Adding New
Product
Line(s)
Raise Prices
Employee
Knowledgeable
People
Cost-Benefit of
Equipment
Market Analysis
on Products
Understand
Organizational
Culture
Sale More
Existing
Product
• Introduce new
product line that
maximizes profit
• Re-evaluate the cost
of existing products
and the markup
charged
• Research service
department for
efficiencies
• Effective
communication of
new products to new
potential customers
Metrics for Success Repeat Customers Attract New
Customers
Increase
customer
satisfaction
Improve Market
Share
Increase
Customer
Value
• Maintain and
Improve
Relationship with
Suppliers
• Efficient use of
floor space.
Customer
Management Theme
Innovation ThemeOperations Theme
26
Revenue Growth
Strategy
Productivity Strategy
Be recognized as a top regional distributor of motor sports
products
• Effective
customer
management on
sales and service
• Courtesy calls to
customers
• Efficient Service
Department
• Best equipment to
service products
• High skill level of
employees
• Executives must
communicate the
strategy
• Have employees submit
suggestions for
efficiency.
• Ensure sensible
measures are used
• Use web-based
software to make the
Balanced scorecard
visible to everyone
Tips for Management