Difference Between Product Revenue And Variable Cost

Assuming that the company’s goal is to maximize profits, the current cost system is not an appropriate tool for strategic planning. The ambiguity of the overhead costs per product makes it difficult to accurately analyze the cause and effect relationships of changes and/or improvements to specific product line.

Since our company’s main focus is premium products we will aim for high contribution margins, around 50%, on average, over all five products. After establishing our company brand and products within the market we will look to increase contribution margin to be between 55%-60% over all five products.

8.20 equals $ 86,700. The contribution margin per unit at a retail price of Cr. 6.85 equal 1.95. The required volume will be the result of dividing the profit impact on the contribution margin per unit.

Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.

Contribution Margin = (Unit selling price – unit variable cost) / unit selling price = ($9.00 – $2.60) / $9.00 = 0.7111 = 71.111%

In terms of Porter’s analysis, cost-leadership and product differentiation strategies were implemented by the team during the simulation, which resulted in the maximum profit of 278.59 million dollars.

The strategy I chose for the simulation is “Niche Cost Leader." First, with the key focus being value, this strategy will challenge me to keep costs at a minimum and force me to streamline overall costs to produce a valuable commodity that, in turn, will generate financial success that can be shared with internal and external stakeholders. Second, as the success of this strategy primarily relies on the existing product line being prosperous, I will be able to practice and hone my forecasting skills based on one product. Though I eventually will produce more than one product, most of the simulation will be conducting under making the primary product as successful as it can be, and reliable forecasts are

Initially, our firm’s business position was at a healthy position. In the beginning of the simulation, our overall market share for the automobile industry was 28.2%; the highest in the market. We realized that our primary strength from product contribution came from our economy car Alec with 63.5% market share for economy cars, and from our utility car, awesome with a 48.5% market share for its vehicle class. Thus, it was evident what we needed to do; maintain high market share of our leading cars while conforming our least profitable vehicle class sustainably to coordinate to customer demand.

Referring to Vice President of Finance, he want to pursue the current approach because they are in profitable based on contribution margin by 35 percent. The company just needs to monitor their margin in control their cost well.

1. What is the competitive situation faced by Wilkerson? The critical product in term of market competition is the pumps of Wilkerson Company. The pumps are Wilkersons major product line with a production of about 12,500 units per month. Pumps currently have the lowest gross margin among all products, because competitors had been reducing prices on pumps and Wilkerson adopted its prices in order to remain competitive and to maintain the volume. 2. Given some apparent problems with Wilkersons cost system, should executives abandon overhead assignment to products entirely by adopting a contribution margin approach in which manufacturing overhead is treated as a period expense? Our conclusion is, that they should not adopt

As, in this case study as the total revenue is $22,500,000 and the total events is 5000 events therefore revenue per event is $4,500 ($22,500,000/5000), therefore, the contribution margin per event is $1,900 ($4,500 - $2,600) and as the contribution margin ratio is contribution margin/revenue; therefore the contribution margin in this case is 42% ($1,900/$4,500).

The true variable costs to Beauregard Textiles include the Direct Labor, Material, Material Spoilage, and Direct Department Expense. By excluding those expenses not related to the production of T-30, we can calculate the contribution margin for Beauregard using unit sales price and unit variable cost. Contribution margin is a measurement of the profitability of a product and is an excellent management tool to help determine whether to keep or drop certain aspects of the business. A positive contribution margin means that the company should produce the product, a negative contribution margin means the company is likely to suffer from every unit it produces.

The relationships with trade show retailers are highly valuable in that they often prove to be long term. Re-orders by retailers from trade shows occur at a 50% clip, and they will re-order twice per year. With an average order from a retailer being $569 (Table 1), and the direct material and labor cost fixed at $267, the contribution margin per order at trade shows will be $302 (Table 2).

As I get further and further along in this simulation, I have noticed that I am beginning to understand what it takes as a marketing manager in order to be successful. Careful considerations must be made to be sure that the right decisions benefit both Minnesota Micromotors, Inc., and our customers. Our success comes from our customers’ success and loyalty that they have with this company. In finding ways to incorporate the important factors that matter most to our customers is what will bring in new customers and keep our existing ones around for the long hall.

with a number of strategic issues facing a capital-intensive, mature industry. Their product costing system was