margin analysis

Margin Analysis Being able to calculate a healthy Margin Analysis will heip the Pesearch \& 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 - The product detalls are for example onty. Your product names and data may dilfler, but the process to calculate margina is ibentieal. Usetul 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 shist was usad MMM. Then, use the values you entered to calculate the Contribution Margin and the Margin Percentage. Finding the maximum amount of profit you can get from one unit of a product is callec Wsigh Potental. This a usofua for a compary shian making a decision about whether to go into production or not. In it's simplest form, it is calculated ats Margin Potential = Maximum Price - Minimum Unit Costs Price Use the customer segment table to find the maximum price that customers deern acceptable. You can find this in the Customer Buying Citeria for each segment