APPENDIX C. DETAILED DATA FOR EQUIPMENT PRICE MARKUPS
 

TABLE OF CONTENTS

C.1	 INTRODUCTION ...........................................................................................................C­1
 

C.2	 DISTRIBUTOR­WHOLESALER COST DATA ...........................................................C­1
 

C.3	 ESTIMATION OF DISTRIBUTOR­WHOLESALER MARKUP STANDARD

DEVIATIONS .................................................................................................................C­1

LIST OF TABLES

Table C.2.1 Costs and Expenses for Distributor­Wholesalers....................................................C­1
 

Table C.3.1 Distributor­Wholesaler Incremental Markup Standard Deviation..........................C­2
 

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APPENDIX C. DETAILED DATA FOR EQUIPMENT PRICE MARKUPS
 

C.1 INTRODUCTION

This appendix provides further details on information presented in Chapter 6, Markups

for Equipment Price Determination for beverage vending machines.

C.2 DISTRIBUTOR­WHOLESALER COST DATA

Table 6.3.1 of Chapter 6, section 6.3, shows distributor­wholesaler revenues and costs in per

dollar sales revenue from U.S. Census Bureau data. Table C.2.1 provides the national level

breakdown of costs and expenses as provided by the U.S. Census Bureau. The column labeled

“Scaling” in Table C.2.1 indicates which expenses were assumed to scale with only the baseline

markup and which were assumed to scale with both the baseline and incremental markups. As

described in Chapter 6, section 6.3, only those expenses that scale with baseline and incremental

costs are marked up when there is an incremental change in equipment costs.

Table C.2.1 Disaggregated Costs and Expenses for Distributor­Wholesalers

Item Dollar Value

($1,000)

Percentage Scaling

Direct Cost of Equipment Sales: Cost of goods sold $9,464,858 68.51% Baseline

Gross Margin $4,351,133 31.49%

Labor Expenses: Salaries and benefits $1,779,622 12.88% Baseline

Occupancy Expenses Baseline

Other Operating Expenses

$1,340,750 9.70% Baseline &

Incremental*

Profit Before Income Taxes $1,230,761 8.91% Baseline &

Incremental

Source: US Census Bureau. December 2005. Wholesale Trade, Miscellaneous Subjects: 2002. EC02­42SX­SB.

Table 4. Detailed Type of Operation for the United States: 2002

US Census Bureau. December 2005. Wholesale Trade, Miscellaneous Subjects: 2002. EC02­42SX­SB

Table 6. Gross Margin and Its Components for Merchant Wholesalers for the United States: 2002

US Census Bureau. December 2005. Wholesale Trade, Miscellaneous Subjects: 2002. EC02­42SX­SB

Table 7. Gross Profit and Its Components for Merchant Wholesalers for the United States: 2002

Note: The distributor­wholesaler costs and expenses are percentage values of sales as opposed to the per dollar of sales revenue values shown in

Table 6.3.1.

*All of the percentage values scale with the baseline costs, but only a fraction of the 9.7% value scales with the incremental costs in the ‘Other

Operating Expenses’ category. As noted in Table 6.3.1, this fraction is estimated to be 50% of the percentage value (9.7%) shown because data

were not available to calculate ‘Occupancy Expenses’ and ‘Other Operating Expenses’ separately. The 50% apportionment is support by

evidence from other rulemakings that indicates that the values for ‘Occupancy Expenses’ and ‘Other Operating Expenses’ are nearly equal, and,

if a difference exists, the value for ‘Other Operating Expenses’ is no more than 1 to 2 percentage point higher than the value for ‘Occupancy

Expenses.’

C.3 ESTIMATION OF DISTRIBUTOR­WHOLESALER MARKUP STANDARD

DEVIATIONS

The U.S Department of Energy (DOE) used U.S. Census survey data to estimate the

distributor­wholesaler markup distribution for BVM equipment that were available only at the

national level as shown in Table C.3.1. DOE estimated the baseline markup and its distribution

(standard deviation) from the known national level data.

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Table C.3.1 Distributor­Wholesaler Incremental Markup Standard Deviation*
 

Number of Firms Sales ($000) Cost of Goods Sold ($000) Gross Margin ($000)

4,715 13,815,991

CV = 2.3%*

9,464,858

CV = 2.4%**

4,351,133

CV = 5.0%*

Markup = Gross Margin / Cost of Goods Sold = 0.46

The markup standard deviation and coefficient of variation are 0.06** and 12.1%**,

respectively.

* Sources:	 US Census Bureau. December 2005. Wholesale Trade, Miscellaneous Subjects: 2002. EC02­42SX­SB.

Table 6. Gross Margin and Its Components for Merchant Wholesalers for the United States: 2002

US Census Bureau. 2004. Table 4. Estimated Coefficients of Variation of Annual Sales, End­of­Year Inventories,

Purchases,Gross Margins, and Gross Margin/Sales Ratios for Merchant Wholesalers, excluding Manufacturers' Sales

Branches and Offices (MSBOs) @ http://www.census.gov/svsd/www/atstable4.txt

Notes: The data are at the national level and, unless otherwise noted, are for NAICS 432440.

*The coefficients of variation (CV) are for NAICS 4234, which is all Professional and commercial equipment and

supplies merchant wholesalers.’

**Calculated

The distributor­wholesaler markup of 0.46 has a standard deviation of 0.056. The

coefficient of variation (or relative standard deviation) is the standard deviation as a percent of

the baseline markup, which is 12.1%. DOE also assumed that the distributor­wholesaler

incremental markup has the same relative standard deviation as distributor­wholesaler baseline

markup.

This analysis was done to understand the level of variability in the distributor­wholesaler

markup. Random variation in distributor­wholesaler markups however has not been introduced

into the LCC analysis.

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