Could you please just solve and tell which alternative is suggestable. Theory is not required just the calculation part.

DALLASGPS COMPANY (DGPS)

DALLASGPS

In January 2011, Laura Dallas, President of DallasGPS, reviewed the segmented statement her Controller, Martin Woo had created. Should DGPS drop its Basic GPS device considering a $19,000 segment loss? The Basic GPS device had been DPGS Companys first entrance into the GPS market in 2003 when the company was founded, and had performed well historically. Dallas wondered if she could let go of the Basic GPS or if there was a way to improve its performance.

Company Background

DGPS Company makes three types of GPS devices. The Basic GPS model is an entry-level car GPS device; it is sold through discounter merchandisers and Amazon.com. The Runners GPS is a miniature model that allows runners to track distance, speed, heartrate and steps while running; it is sold through athletic stores and on sports gear websites. The Chart Plotter GPS is a specialized GPS for sailors; it can be customized with maps of the sea floor and specific dedicated GPS sites.

DGPS Companys vision is described in the following statement: DGPS strives to be the global leader in every market we serve, and our products will be sought after for their compelling design, superior quality, and best value. DPGS Companys mission is to be an enduring company by creating superior products for automotive, aviation, marine, outdoor, and sports that are an essential part of our customers lives.

Industry Data

The automotive GPS market reached maturity in 2007, and had been declining ever since; however, it was still the largest of the three markets DGPS served with a market size of US 8.3 billion. In 2010, 29% of consumers used their smartphone for commuting purposes in their cars. Recreational GPS equipment was in a growth phase, reaching its highest market size of 807 million in 2010. Marine GPS equipment revenues were steady at around US 3 billion in each year from 2007 to 2010.

DallasGPS Management Reports

Dallas is considering dropping the Basic GPS line and keeping the Runners GPS and the Chart Plotter GPS based on the following segmented income statement prepared by Woo for the three product lines:

DallasGPS

Contribution Margin

For the year ended December 31, 2010

	BASIC	RUNNERS	CHART PLOTTER	TOTAL
Sales	450,000	980,000	1,670,000	3,100,000
Less Variable Costs	324,000	372,000	601,600	1,297,600
Contribution Margin	126,000	608,000	1,068,400	1,802,400
Less Traceable Fixed Costs
Advertising	85,000	124,000	130,000	339,000
Supervision	60,000	115,000	135,000	310,000
Segment Margin	(19,000)	369,000	803,400	1,153,400
Less Common Fixed Costs				915,000
Operating Income				238,400

Because the product lines are sold through different distribution channels, Woo is not sure if customer loyalty, brand reputation or sales of other product lines would be affected by the decision to drop the Basic GPS. Woo would also be concerned if any employees had to be laid off as a result of dropping the Basic GPS.

Dallas is looking for short term and long term marketing ideas from Woo. He has a few ideas from his University marketing and strategy courses that he wants to present to Dallas.

DALLASGPS COMPANY (DGPS)

REQUIRED:

It is June 2011, prepare a report addressed to the President, Laura Dallas, about whether the Basic GPS device should be dropped or not. Include a memo, introduction, background information, alternatives considered, alternative analysis, other factors to consider and recommendation and action plan. Be sure to let Dallas know what decision criteria you are using to make this recommendation. A SWOT analysis is recommended.

20	Spelling, grammar and organization Report components, Professional presentation Recommendation
20	Qualitative discussion
20	Quantitative assessment - Calc & explanation (original, A & B scenarios)
60	TOTAL

In addition to making the original recommendation, consider the following two independent situations. In each situation, explain whether your original recommendation would change or stay the same.

A) Assume that the Vice-President of Marketing has indicated that dropping the Basic GPS device will impact sales of the other two lines. The Runners GPS is expected to have a 10% loss in sales volume and the Chart Plotter is expected to have a 2% loss in sales volume. Prepare a revised contribution format segmented statement with dollars and percentages to support your recommendation in this situation.

B) Ignoring Part A (about loss of sales volume), suppose that DGPS Company has undergone an analysis of the common fixed costs of the company, and has found that using Activity Based Costing has revealed that Inspecting Products, Customer Service and Material Handling could all be traced to the three different GPS devices. In other words, the common costs of $915,000 were not all, in fact, common, and some would be eliminated if certain product lines were dropped. The activity rates and Basic GPS usage are shown below. Provide quantitative support for your recommendation.

Activity	Activity Rate	Basic GPS Usage
Inspection	$700 per batch	80 batches
Customer Service	$5 per call	12,000 calls
Material Handling	$50 per move	1,400 moves

*Total activity for the three product lines were: batches 200; number of calls was 30,000; number of moves 2,800.