Margin Analysis

Being able to calculate a healthy Margin Analysis will help the Research & Development Department understand how to change the cost of material, and the Production Department understand how to change the cost of labor.

You will need:

• The Production Analysis report (page 4) of the FastTrack for Round 0
• The Segment Analysis reports (pages 5-6) of the FastTrack for Round 0

Determining Current Margin

Name	Primary Segment	Units Sold	Unit Inventory	Revision Date	Age Dec.31	MTBF	Pfmn Coord	Size Coord	Price	Material Cost	Labor Cost	Contr. Marg.	2nd Shift & Overtime	Automation Next Round	Capacity Next Round	Plant Utiliz.
Able	Low	1,200	87	11/21/2011	3.1	21000	6.4	13.6	$34.00	$16.17	$10.11	20%	63%	3.0	800	161%

* The product details are for example only. Your product names and data may differ, but the process to calculate margins is identical.

Useful formulas: Contribution Margin($) = Price - (Material Cost + Labor Cost) Margin Percentage (%) = Contribution Margin/Price

Calculating Margin Activity

In the table, enter each product's price, material cost, and labor cost found in your report, and note whether or not a second shift was used (Y/N). Then, use the values you entered to calculate the Contribution Margin and the Margin Percentage.

Incomplete

Current Margin
Product	Name	Price	Material Cost	Labor Cost	Second Shift (Y/N)	Contribution Margin ($)	Contribution Margin (%)