Class_5-_Margin_Profit_Upload

Class5:Chapter3Profit&MarginPage2Margin(onsales)isthedifferencebetweensellingpriceandcost.Thisdifferenceistypicallyexpressedeitherasapercentageofsellingpriceoronaper-unitbasis.Purpose:Todeterminethevalueofincrementalsales,andtoguidepricingandpromotiondecisions.Page3Chapter3Purpose:Todeterminethevalueofincrementalsales,andtoguidepricingandpromotiondecisions.Margin(%)=($)RevenueSalesTotal($)]CostTotal-($)RevenueSales[TotalUnitMargin($)=SellingPriceperUnit($)–CostperUnit($)Margin(%)=($)UnitperPriceSelling($)MarginUnitPage4Table3.1Sales,Costs,andMarginsStandardDeluxeTotalSalesinYards20222SellingPriceperYard$24.00$64.00TotalSales$$480.00$128.00$608.00CostperYard$18.00$32.00TotalCosts$$360.00$64.00$424.00TotalDollarMargin($)$120.00$64.00$184.00UnitMargin$6.00$32.00$8.36Margin(%)25%50%30%Margin(%)=($)UnitperPriceSelling($)MarginUnitPage5Table3.1Sales,Costs,andMarginsStandardDeluxeTotalSalesinYards20222SellingPriceperYard$24.00$64.00TotalSales$$480.00$128.00$608.00CostperYard$18.00$32.00TotalCosts$$360.00$64.00$424.00TotalDollarMargin($)$120.00$64.00$184.00UnitMargin$6.00$32.00$8.36Margin(%)25%50%30%Page6Table3.2RelationshipBetweenMarginsandMarkupsPriceCostMarginMarkup$10$9.0010%11%$10$7.5025%33%$10$6.6733.3%50%$10$5.0050%100%$10$4.0060%150%$10$3.3366.7%200%$10$2.5075%300%10x100=111.11or11%9Page7Purpose:Tocalculatesellingpricesateachlevelinthedistributionchannel.BuysRawMaterialsfor$0.50ManufacturerBuysfromManufacturerfor$1.00SellstoDistributorfor$1.00DistributorBuyfromDistributorfor$2.00SellstoWholesalerfor$2.00WholesalerBuysfromWholesalerfor$3.00SellstoRetailerfor$3.00RetailerBuysfromRetailerfor$5.00SellstoConsumerfor$5.00ConsumerUnitMargin$0.50$1.00$1.00$2.00$5.00Margin%50%50%33.3%40%Margin($)forentirechain$4.50Margin(%)90%Figure3.1ExampleofaDistributionChannelPage8SupplierSellingPrice($)=CustomerSellingPrice($)-CustomerMargin($)CustomerSellingPrice($)=(%)]MarginCustomer-[1($)PriceSellingSupplierSuppliersellingprice=Customersellingpricex(1-Customermargin%)Page9Purpose:Tocalculatesellingpricesateachlevelinthedistributionchannel.BuysRawMaterialsfor$0.50ManufacturerBuysfromManufacturerfor$1.00SellstoDistributorfor$1.00DistributorBuyfromDistributorfor$2.00SellstoWholesalerfor$2.00WholesalerBuysfromWholesalerfor$3.00SellstoRetailerfor$3.00RetailerBuysfromRetailerfor$5.00SellstoConsumerfor$5.00ConsumerUnitMargin$0.50$1.00$1.00$2.00$5.00Margin%50%50%33.3%40%Margin($)forentirechain$4.50Margin(%)90%Figure3.1ExampleofaDistributionChannelCustomerSellingPrice($)=(%)]MarginCustomer-[1($)PriceSellingSupplier.5/.51/.52/.6673/.60Page10Table3.4Example—PastaSauceDistributionMarginsDistributionStageMarginManufacturer50%Distributor50%Wholesaler33%Retailer40%Manufacturer’sCost=0.50Sellingprice=Cost+MarginCustomerSellingPrice($)=(%)]MarginCustomer-[1($)PriceSellingSupplierWhatisthefinalretailprice(pricetoconsumers)?Page11Table3.5Cost(PurchasePrice)ofRetailerStageMargin%$CosttoConsumer$5.00RetailerMargin40%$2.00CosttoRetailer$3.00WholesalerMargin33%$1.00CosttoWholesaler$2.00DistributorMargin50%$1.00CosttoDistributor$1.00ManufacturerMargin50%$0.50Manufacturer'sCost$0.50SupplierSellingPrice($)=CustomerSellingPrice($)*[1-CustomerMargin(%)]Page12Table3.6MarkupsAlongtheDistributionChannelStageMarkup%$MarginManufacturer'sCost$0.50ManufacturerMarkup100%$0.5050%CosttoDistributor$1.00DistributorMarkup100%$1.0050%CosttoWholesaler$2.00WholesalerMarkup50%$1.0033.3%CosttoRetailer$3.00RetailerMarkup67%$2.0040%CosttoConsumer$5.00Page13HYBRID(MIXED)CHANELMARGINSHybridChannel:Thenuseofmultipledistributionsystemtoreachthesamemarket.Acompanymightapproachconsumersthroughstares,theWed,andtelemarketing,forexample.Marginsoftendifferamongsuchchannels.Hybridchannelmayalsobeknownasmixedchannels.Page14Table3.7Sadetta’sChannelMeasuresOnlineInStoreInStoreSellingPrice(SP)$10.00$12.00SupplierSellingPrice(SSP)$5.00$9.00UnitMargin($)$5.00$3.00Margin(%)50%25%UnitsSold123%UnitSales33.3%66.7%DollarSales$10.00$24.00$34.00%DollarSales29.4%70.6%TotalMargin$5.00$6.00$11.00AverageUnitMargin($)$3.67AverageMargin(%)32.4$AverageSellingPrice$11.33AverageSupplierSellingPrice$7.67Margin(%)=($)UnitperPriceSelling($)MarginUnitAverage/Total11/311/3434/35+9+9/3Page17StockKeepingUnit(SKU):Atermusedbyretailerstoidentifyindividualitemsthatarecarriedor“stocked”withinanassortment.Thisisthemostdetailedlevelatwhichtheinventoryandsalesofindividualproductsarerecorded.Page18SKUsUnitsSoldUnitPriceUnitSKUNameSizePriceSold(Liters)(perLiter)ShareEconomy1Liter$8lOklOk$817.24%Fridge-Friendly0.5Liter$680k40k$1268.97%SingleServing0.05Liter$140k8k$2013.79%TOTAL130k58k100%EXAMPLE:Carlsells10,000one-litereconomypacksofCCC,80,000fridge-friendlyhalfliters,and40,000singleservings.Whatwashisaveragepriceperliter?AveragePriceperUnit($)=)(#SalesUnit($)Revenue=40k)*0.0580k*0.510k*(l40k)*$180k*$610k*($8=58$600=$10.54Page19SKUsUnitsSoldUnitPriceUnitSKUNameSizePriceSold(Liters)(perLiter)ShareEconomy1Liter$8lOklOk$817.24%Fridge-Friendly0.5Liter$680k40k$1268.97%SingleServing0.05Liter$140k8k$2013.79