DOE Response to Stakeholder Questions Regarding Mark

- up Analysis at the Commercial Ice Maker Public Meeting on April 14, 2014

A number of stakeholders raised questions during the public meeting as to how DOE created its mark

ups and asked for clarification so that they can better analyze DOE’s proposed standards. One
individual, Scott DeShetler of Ice

- O

- Matic , submitted written questions to DOE on May 7, 2014. These questions, and DOE’s respons es to th ose questions , follow

.

1. Markup is typically stated in fixed (dollar) terms and as a percent. Can you explain what 1.3 6

, 1.45, etc. refers to. Is that a percent or a multiplier? Example: if a wholesaler buys a machine for $100 is this model suggestin g he/she is reselling it at $136?
Response: Your example is correct. It is a multiplier. The 1.36 multiplier is applied to the manufacturer selling price from the engineering analysis and is the same as a 36% markup. Sometimes we refer to these as markup factors to better imply that they are multipliers.

2. Is the table sequential? Example: from the first example if the wholesaler is selling the machine for $136 to the dealer is the dealer selling it for $272 ($136x2.00) Response: The data in columns shown o n the slide are used independently for each distribution chain and are independently applied to the manufacturer selling price. In this example provided, if the original manufacturer selling price was $100, the price after passing through the

dealer would be $200 ($100 x 2.00). The average dealer markup of 2.00 shown in the slides includes the wholesaler markup (i.e., the additional markup for the dealer alone accounts for the difference between 1.36 and 2.00).

3. How is the Overall Weighted Average Markup c alculated? Example: With an initial cost of $100 to the value chain and a final price of $272 from the previous example the value chain markup is 1.72 vs 1.76 ($272

- $100/$100)
Response: The overall weighted average markup is a weighted average of the 38% of units assumed to be delivered through the wholesaler chain and the 62% of units assumed to be delivered through the dealer chain. (0.38 x 1.36) + (0.62 x 2.0) = 1.76 (rounded) Using the original $100 manufacturer selling price, the overall weighted a verage price after markup would be $176.

4. How are you making the calculation from pure markup to markup with sales tax? It looks like the tax rate is different for the baseline versus the incremental. What are the assumptions as to tax

rates ? Response: The sales tax for all base and incremental markups shown on the presentation slide is 7.15%. This is a population

- weighted average of the state sales tax rates obtained from an on

line source. The source for the sales tax rates is cited in TSD Chapter 6, alon g with the date the
source was last accessed. Note that the values within the LCC model are not rounded to 2 decimal places as they were in the slide, and thus you may find a small rounding error if doing hand calculations (e.g., applying the sales tax mu ltiplier to the rounded 1.36 wholesaler markup shown in the slide would seem to be 1.36 * 1.0715 = 1.46, but the unrounded value of 1.3569 * 1.0715 = 1.454 rounded to three decimals or shown on the slides as 1.45).