Name (print) ____________________ Date __________________________

DATOR & NOBLE

Jaime Dator and Oscar Noble own Dator Company and Noble Company. They man !act re and sell the same prod ct" and competition between them has always been !riendly. Cost and pro!it data ha#e been !reely e$chan%ed. &ni!orm sellin% prices ha#e been set by mar'et conditions. (owe#er" Dator and Noble di!!er mar'edly in their mana%ement thin'in%. Operations at Dator are hi%hly mechani)ed" and the direct labor !orce is paid on a !i$ed*salary basis. Noble ses ho rly*paid man al labor !or the most part and pays incenti#e bon ses. Dator+s salesmen are paid a !i$ed salary" whereas Noble+s salesmen are paid small salaries pl s commissions. Noble ta'es pride in his ability to adapt his costs to !l ct ations in sales #ol me and has !re, ently chided Dator on his -in!le$ible o#erhead.. Last year" the companies reported similar pro!its on /(/ 011"111 sales. (owe#er" when comparin% res lts !or this year" Noble was startled by the !ollowin% res lts 2money !i% res in pesos34 DATOR COMPANY Last Year This Year Sales Cost of oo!s sol! " operatin e#penses Net in$ome Ret%rn on sales &''(''' )'(''' &'(''' &'* &+'(''' ),(''' +-(''' +& .* NOBLE COMPANY Last Year This Year &''(''' )'(''' &'(''' &'* &/'(''' &0'(''' +'(''' &0 1*

5 spectin% that operatin% ine!!iciencies may ha#e arisen" Noble and his acco ntant made a thoro %h in#esti%ation o! costs. They did not nco#er any e#idence o! costs that were o t o! line. At a loss to e$plain the lower increase in pro!its on a m ch hi%her increase in sales #ol me" they see' yo r help.

/repare an e$planation !or Noble on why his pro!its !or This*6ear were lower than those o! Dator despite Noble+s sales ha#in% been hi%her. &se only the bac' side o! this paper !or yo r e$planation to Noble.