1. Used Computer System Sales, Inc. (UCSSI), which began its operations in July of 2007, specialized in the purchase, sale, distribution, upgrade, and repair of new, as well as refurbished, equipment for the Sun Microsystems/Oracle America market.
2. A fire occurred at UCSSI’s place of business beginning late in the evening of September 30, 2009 and continuing into the morning hours of October 1, 2009.
3. The fire destroyed UCSSI’s entire inventory.
4. The landlord informed UCSSI that the existing facility would need to be extensively renovated and would not be available for at least a year.
5. UCSSI quickly found a new and larger facility and moved to its new location on October 9, 2009.
6. The adjuster indicates that UCSSI’s inventory destroyed in the fire was worth approximately $80,000.
7. John and James, two brothers, are the two principals at USCCI. John is responsible for acquiring large lots of used computer equipment from firms that go out of business. James is responsible for taking the used equipment apart and building computer systems using refurbished parts. Ben is a full-time employee responsible for sales. In addition to a small base salary, he earns a 2% commission.
8. Around June of 2009, John and James came up with a new and different business idea and decided to set up a separate business called Creative Software Solutions, Inc. Since then, they have been spending more and more time on getting the new business up and running.
9. UCSSI’s sales records show that prior to the fire, it had one large customer – ABC, Inc. From inception through September 30, 2009, ABC accounted for over 25% of UCSSI’s sales.
10. ABC went out of business on June 30, 2010.
11. UCSSI received insurance proceeds totaling $175,974 in 2010 for lost of various business properties such as equipment, furniture, and computers. UCSSI mistakenly reported the proceeds as sales receipts in its 2010 tax return.
12. UCSSI has an insurance policy that would pay for up to 1 year’s worth of lost profits as a result of the fire.
13. UCSSI has engaged you to prepare a lost profit analysis to support its insurance claim.
Timeline of Events
9/30/09 – Fire at UCSSI’s office and warehouse, destroyed all inventory, facility no longer usable
10/01/09 – 1st purchases of inventory
10/07/09 – New lease signed, new office space is 25% larger
10/10/09 – Vendor invoice showing new location as the “ship to” address
10/14/09 – 1st sale after the fire
10/22/09 – 1st sales quote after the fire
Scoring Rubric
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Define and explain the damage period
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0.50
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Calculate lost sales
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0.75
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Calculate cost of goods sold related to the lost sales
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0.75
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Calculate avoided operating expenses, if any
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0.75
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Summarize your analysis
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0.25
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Total
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3.00
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Note: Please send one document that is formatted for printing. You are welcome to use word or excel or a combination thereof in performing your analysis, but turn in only one file (i.e. combine your word and excel into a single pdf file). Any exhibits must be of presentation quality, meaning describe your calculations adequately.
Attachment:- LP_Case_Study_New-3.xls