Shuman Automobiles Inc.

CI-IAYrER 8 Financial Responsibility Centers

Shuman Automobiles Inc.

Shaman, the part owner and manager of an dealership, was nearing retirement, wanted tQ begin relinquishing his personal ~atrol over the business’s operatio~ (See Ex’hibit 1 for current financial statements).The repuhe had established in the community led believe that the recent growth in his bnsi:~~ess would continue. His longstanding policy of new car sales as the principal busiof the dealership.had paid o!t~in Shaman’s ~:::; ~ ~?’ ,2 ..... ~ opmaon. This, combined w~th close attentmn to ~ ~:~stomer relations so that a substantial mount of r~peat business was available, had increased the .~}npany’s sales to a new high level; Therefore, he ~!: ffanted to make organizational changes t~r’cope ~: ~th the new situation especially given his desire !9 withdraw from any day-to-day managerial reSponsibilitie~ Shaman’s three silent partners agreed to this decision. Accordingly, Shaman divided up the bnsi~s into three departments: new car sales, used .c.at sales, and the service department (which was ~io responsible for selling parts and accessories). He then appointed three of his most trusted emp!oyees managers of the new departments: Jean Iv[oyer, new car sales; Paul Fiedler, used car sales; and Nate Bianci, service department. All of these p~.epple had been with the dealership for several ~. Each of the managers was told to run his dep.~ent aS ff it were an independent business: In ~rder to give the new managers an incentive, their remuneration was t6 be calculated as a s~aight .p.~entage of their department’s gross profit. : Soon after taking over as manager of new !.~ :sales, Jean Moyer had to settle upon the ~!...~amount to offer a particular customer who ~.~ed to trade his old car as a part of the pur~!!l~ase price of a new one with a list price of ~i~00. Beforeclosing the sale, Moyer had to de~de the amount he would offer the customer for ~i~he trade-in value of the old car. He knew that ff ~o...