Question
SaileshMishra is owner of Hyundai car showroom in Bhubaneswar along with an associated Hyundai service center. He has four revenue sources for this business. First
SaileshMishra is owner of Hyundai car showroom in Bhubaneswar along with an associated Hyundai service center. He has four revenue sources for this business. First is from the walk-in customers who visit the showroom to buy cars. The average selling price of a car is Rs 755,000 and he earns a margin of 7.5% on sale of each car to a walk-in customer. His average monthly car sale is 75 units. His second source of revenue is by selling cars to sub-dealers present in rural geographies on the outskirts of Bhubaneswar. His margin is lower on these sales at 5% since it is channel sales and not retail sales. However, the average selling price of cars sold to sub-dealers is slightly higher at Rs 800,000. He sells nearly 30 car units every month to sub-dealers. He also earns a monthly revenue of Rs 4,500,000 from his Hyundai service center by servicing the cars at a significantly high margin of 25%. Finally, Sailesh also insures 45 cars every month out of the 75 that he sells. He makes Rs 10,000-/- on every car that he insures as a commission from insurance company. To ensure smooth business operations, Sailesh employs 7 salespersons, 1 sales manager in Hyundai showroom, 12 mechanics, and 1 workshop manager in Hyundai service center. His salesperson salary expenses include salary of 7 salespersons at an average salary of Rs 30,000 per person per month and 1 senior sales manager salary at Rs 50,000 per month. The 12 mechanics in the service center receive an average salary of Rs 25,000 per month whereas the lone workshop manager earns a monthly salary of Rs 45,000. Sailesh also has an accountant and a computer operator to manage backend administrative operations of the business. The accountant earns Rs 25,000 monthly whereas computer operator takes home Rs 12,000 as his monthly salary. The other administrative expenses include printer, stationary, telephone, internet, electricity and running of computers which put together cost SaileshRs 100,000 per month. He maintains a stock of 150 cars with an average cost price of Rs 700,000. His cash on hand investment is Rs 3,500,000. His security deposit with Hyundai is Rs 1,300,000. His total investment in machineries and furniture is Rs 2,500,000. Based on this given information, calculateReturn-on-Investment for complete Hyundai business owned by Sailesh. |
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