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**

**C­i C­ii** 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.** 

**C­1**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.** 

**C­2**