Margin Analysis Being able to calculate a healthy Margin Analysis will help the Research & Development Department understand how to change the material and the Production Department understand how to change the cost of labor You will need: The Production Analysis report (page 4) of the Capstone Courier for Round O The Segment Analysis reports (pages 5-9) of the Capstone Courier for Round Determining Current Margin Shit Auto & mation Capacity Material Labor Contr Ove Nd Nexd Plant Units Inven Primary 800 66% 1.400 t20% 900 45% 600 73% 600 63% Trad 999 189 11/21/2010 Able Acre sais, 12 46 14000 30 170 $21.00 1.7 23000 12.0 $3a00 $15.98 $0.57 3%10% 2.525000 9.4 15.5 53300 S15.87MS7 23%10% 2.6 19000 4,0 110 $3300 $1362 $857 30%10% 27% 5.0 30% 4/18/2012 6/30/2011 366 358 314 40 78 Agape Size Useful formulas Contribution Margin($) Price-(Material Cost Labor Cost) Margin Percentage (%)-Contribution Margn/Price (Y/N). Then, use the values you entered to calculate the Contribution Margin and the Margin Percentage Traditional Eat Ebb Low End Echo High End Egg Determining Margin Potential Finding the maximum amount of profit you can generate from one unit of a product is called Margin Potential. This is useful for a company when making a decision about whether to go into production or not. In its simplest form, you can calculate Margin Potential as Margin Potential Maximum Price- Minimum Unit Costs Price Use the information table below to find the maximum price that customers deem acceptable. You can find this in the Customer Buying Criteria for each segment Minimum Material Cost Calculate the minimum Material Cost per segment using the following equation and table below Minimum Labor Cost Calculate the minimum Labor Cost for each segment Assume a base labor cost of $11.20 ($11.20 is a rough estimate of labor cost used solely to illustrate the Margin Potential Concept) Minimum Material Cost (owest Acceptable MTBF 0.30)/1000 Trailing Edge Position Cost Minimum Labor Cost [$11.20-(1.12 Automation Ratings Below)]+ 1.12 Level (out Price Cost MTBF of 10) Cost $30.00 $7.80 14,000 8.0 Traditional $3 80 $25.00 12,000 10.0 $1.00 S5 00 Low End 5.0 $10.00 $40.00 20,000 S6.00 High End 6 0 $35.00 22,000 $8.50 $4.50 $35.00 6.0 16,000 $8.50 $4.50 Minimum Labor Contribution Margin Contri Cost Maximum Minimum Material Cost Name Product Price Traditional Eat Low End Ebb High End Echo Size Egg The Round 0 Capstone Courier Margin Analysis Being able to calculate a healthy Margin Analysis will help the Research & Development Department understand how to change the material and the Production Department understand how to change the cost of labor You will need: The Production Analysis report (page 4) of the Capstone Courier for Round O The Segment Analysis reports (pages 5-9) of the Capstone Courier for Round Determining Current Margin Shit Auto & mation Capacity Material Labor Contr Ove Nd Nexd Plant Units Inven Primary 800 66% 1.400 t20% 900 45% 600 73% 600 63% Trad 999 189 11/21/2010 Able Acre sais, 12 46 14000 30 170 $21.00 1.7 23000 12.0 $3a00 $15.98 $0.57 3%10% 2.525000 9.4 15.5 53300 S15.87MS7 23%10% 2.6 19000 4,0 110 $3300 $1362 $857 30%10% 27% 5.0 30% 4/18/2012 6/30/2011 366 358 314 40 78 Agape Size Useful formulas Contribution Margin($) Price-(Material Cost Labor Cost) Margin Percentage (%)-Contribution Margn/Price (Y/N). Then, use the values you entered to calculate the Contribution Margin and the Margin Percentage Traditional Eat Ebb Low End Echo High End Egg Determining Margin Potential Finding the maximum amount of profit you can generate from one unit of a product is called Margin Potential. This is useful for a company when making a decision about whether to go into production or not. In its simplest form, you can calculate Margin Potential as Margin Potential Maximum Price- Minimum Unit Costs Price Use the information table below to find the maximum price that customers deem acceptable. You can find this in the Customer Buying Criteria for each segment Minimum Material Cost Calculate the minimum Material Cost per segment using the following equation and table below Minimum Labor Cost Calculate the minimum Labor Cost for each segment Assume a base labor cost of $11.20 ($11.20 is a rough estimate of labor cost used solely to illustrate the Margin Potential Concept) Minimum Material Cost (owest Acceptable MTBF 0.30)/1000 Trailing Edge Position Cost Minimum Labor Cost [$11.20-(1.12 Automation Ratings Below)]+ 1.12 Level (out Price Cost MTBF of 10) Cost $30.00 $7.80 14,000 8.0 Traditional $3 80 $25.00 12,000 10.0 $1.00 S5 00 Low End 5.0 $10.00 $40.00 20,000 S6.00 High End 6 0 $35.00 22,000 $8.50 $4.50 $35.00 6.0 16,000 $8.50 $4.50 Minimum Labor Contribution Margin Contri Cost Maximum Minimum Material Cost Name Product Price Traditional Eat Low End Ebb High End Echo Size Egg The Round 0 Capstone Courier