013 Delivery Expense

Expenses

Variable Selling

Synopsis

When preparing a vehicle for delivery to a customer, all expenses related to this effort are recorded in Account 013, Delivery Expense. This includes mechanical labor to service the vehicle, the cost of gasoline provided at delivery and any additional costs related to preparing the vehicle. Not included are reconditioning costs for used vehicles – reconditioning is recorded in Account 647A, Reconditioning – Certified Used Cars ; Account 647B, Reconditioning – Other Used Cars ; Account 651A, Reconditioning – Certified Used Trucks; or Account 651B, Reconditioning – Other Used Trucks.

Debits

Credits

The expense at Internal selling rates of preparing vehicles for delivery
The cost of cleaning and detailing vehicles just prior to delivery
The cost of safety inspections required by law prior to delivery
Internal selling price of the labor for removing accessories and optional equipment
Internal selling price or cost of gasoline supplied with individual New & Used vehicles sold
Cost of direct purchases of gasoline for individual New & Used vehicles sold
The cost of supplies to maintain vehicles while in inventory such as car wash, polish, towels, cleaning rags, etc.
Expense (such as tolls, parking, overtime meals and other expenses in addition to wages) of employees delivering vehicles to customers
The cost of minor damage to vehicles while in transit and for which a claim is not be filed against the carrier
The cost of incidental items purchased solely for the delivery of use vehicles such as missing cigarette lighters, missing gearshift knobs and other removable items
The internal selling price of the labor and materials for maintaining used vehicles in salable condition after the vehicles have been reconditioned

Courtesy or distant delivery fees received from the factory or other dealers

Example 1

Record a repair order in the amount of $107 to remove accessories from a new vehicle. The cost of labor is $19.

Journal: Internal Sales

Entry:		Debit	Credit
Account 013-01	Delivery Expense – New Vehicles Department	$107
Account 663	Cost of Sales – Internal Labor – Mechanical	$19
Account 463	Sales – Internal Labor – Mechanical		$107
Account 247A	Inventory – Work in Process – Mechanical		$19

Distribution of Expenses

	Departmental Distribution
013 Delivery Expense	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Remove accessories from a new vehicle	Total expense
Gasoline furnished with a used vehicle sold		Total expense
Expense of an employee delivering a lease unit			Total expense
Additional pre-delivery work over factory specifications	Total expense
Washing cleaning and polishing used vehicles while in dealer inventory		Total Expense

Comments

On a per unit basis, Delivery Expense should be sufficient to cover the cost of pre-delivery mechanical labor (depending on the dealership labor rate and internal charges), gasoline (fuel), necessary vehicle clean up and car washes. When the average expense exceeds these levels, the account should be analyzed to make sure that repairs, “goodwill”, or reconditioning costs are NOT charged to this account. Repairs should be posted to the inventory value of the vehicle using the corresponding inventory account below:

Account 230, Demonstrators

Account 231, New Cars

Account 235, Medium Duty Trucks

Account 237, New Trucks

Account 238, Other Automotive

Account 240, Used Cars

Account 241, Used Trucks

Note:

Failure to account for repairs properly will result in over-stated vehicle gross profits and inflated sales commissions paid to sales personnel.

Departmental Distribution