CASE 3-1 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 companys Fargo warehouse. Young Joaquin (J. Q.) Brant, with a fresh M.B.A. 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 firms controller drew up a budget each year, and each warehouses monthly activity (units shipped) and costs were tallied.

EXHIBIT 3-A Brant Freezer Warehouse Performance

		2009 Figures							2010 Figures
Units Shipped				Warehouse Costs			Units Shipped			Warehouse Costs
	12 months Jan- Feb	5 months through May 31		12 months Jan- Feb	5 months through May 31		Projected 12 Months Jan-Dec	Actual 5 Months May 31		Budgeted 12 months Jan - Dec	Actual Costs through May 31
Atlanta	17,341	4,080		156,830	35,890		18,000	4,035		178,000	40,228
Boston	6,920	3,061		63,417	27,915		7,200	3,119		73,000	29,416
Chicago	28,104	14,621		246,315	131,618		30,000	15,230		285,000	141,222
Denver	3,021	1,005		28,019	8,600		3,100	1,421		31,000	14,900
Fargo	2,016	980		16,411	8,883		2,000	804		17,000	9,605
Los Angeles	16,491	11,431		151,975	109,690		17,000	9,444		176,000	93,280
Portland	8,333	4,028		73,015	36,021		9,000	4,600		85,000	42,616
St. Louis	5,921	2,331		51,819	23,232		8,000	2,116		56,000	19,191

Exhibit 3-A shows actual 2009 figures for all warehouses, plus actual figures for the first five months of 2010. Projected 12-month 2010 budgets and shipments are also included. Exhibit 3-Bshows the income statement for 2009. Exhibit 3-C is the 2009 balance sheet. If you are familiar with Excel or other spreadsheet software, you might try using it to answer the following questions.

EXHIBIT 3-B Brant Freezer 2009 Income Statement

Income Statement 2009
Sales					$4,003,450
	Cost of Goods Sold				$937,000
Gross Margin					$3,066,450
	Transportation Cost	$657,322
	Warehousing Cost	$735,982
	Inventory Carrying Cost	$567,987
	Other Operating Costs	$345,876
	Total Operating Costs				$2,307,167
Earnings before interest and taxes					$759,283
	Interest				$110,000
	Taxes				$69,000
Net Income					$580,283

EXHIBIT 3-C Brant Freezer 2009 Balance Sheet

Balance Sheet 2009
Assets
	Cash			$706,034
	Accounts Receivable			$355,450
	Inventory			$1,590,435
	Total Current Assets			$2,651,919
	Net Fixed Assets			$803,056
	Total Assets			$3,454,975
Liabilities
	Current Liabilities			$1,678,589
	Long-term Debt			$398,060
	Total Liabilities			$2,076,649
Shareholders' Equity				$1,378,326
Total Liabilities and Equity				$3,454,975

Questions:

Read Case 3.1, Brant Freezer Company. Using the table provided for the units shipped and warehouse costs for all eight warehouses, identify the warehouse that had the best results for the Brant Company and explain the criterion used to determine which warehouse had the best results.

Lastly, the year 2010 is nearly half over, and J.Q. is told to present the forecasted expenditures for each of the eight warehouses for the last six months in 2010. Do his work for him. Recommend steps to improve Return on Assets (ROA) for the company.

Thank you.