As
an industry, we take a high profit margin from the sale of oil and
lubricants. There is always a debate to be had as to whether the sale
of oil and lubricants should be shown within the Service Department or
the Parts Department. Some manufacturers financial reports show this
statistic within the Parts Department, which provides the reason for
it being shown in this section of the book, however your financial
reports may show it in the Service Department.
Example:
A) Oil Sales = R10,357 B) Oil Cost of Sales = R3,936 C) Oil Gross Profit = R6,421 (A - B) D) Gross Profit on Oil Sales = 62% (C ÷ A X 100)
Discussion:
Most
financial reports include the value of oil sales together with the
value of oil gross profit; a good report will also show you the
percentage of gross profit that has been retained.
Special note:
In
order to measure this information accurately, you need to capture the
opening oil stock and the closing oil stock at the end of each period,
taking into account any oil purchases and from this you can determine
how much oil has been used. This of course is your true cost of sale.
If you do not currently use this method, and your oil is not metered,
how do you account for your oil?