Lesson Report Tutorial FastTrack Company Strategy Plug-ins Margin Analysis 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 Fast Track for Round 0 The Segment Analysis reports (pages 5-6) of the Fast Track for Round 0 Determining Current Margin Capacity Pwy Use Nene Serr y 2007 New **=*=*=*=*=13: Pin yol 1 MFCard Cordlige 11 21000 4 6 1916 Mae Carbor CoolMaram 316 17 18 1120% ON Revision 11010011 Pound U * The above product s are for example only. Your product names and data may difer, but the process to calculate margins is identical Useful formulas Contribution Margin(5) Price - Material Cost + Labor Cost) Margin Percentage (%) - Contribution MarginPrice Calculating Margin Activity In the table below enter each products price, material cost and labor cost found in your report, and note whether or not a second shift was used Calculating Margin Activity In the table below enter each products 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 Eat Price Material Cost Labor Cost Second Shift (Y/N) Contribution Margin (5) Contribution Margin() The Round 0 Foundation FastTrack Determining Margin Potential Finding the maximum amount of profit you can get 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 it's simplest form, it is calculated as Margin Potential - Maximum Price - Minimum Unit Costs Price Use the information table below to find the maximum pnce that customers deem acceptable. You can find this in the Customer Buying Criteria for each segment Minimum Material Cost Minimum Labor Cost Calculate the minimum Labor Cost for each segment Assume a base Calculate the minimum Material Cost per segment using the following labor cost of $11 20 ($11 20 is a rough estimate of labor cost used equation and table below solely tollustrate the targin Potential Concept) Minimum Material Cost - Lowest Acceptable MTBF0 30)/10002 - Minimum Labor Cost-1511 20 - (1 12 Automation Ratings Below curewwsicam.com/stud t/portal/index.cfm?template=gettingStarted Situation Analysis. Margin Analysis marym ru KTU ETICHETTUM UM COSES 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 Minimum Labor Cost Calculate the minimum Labor Cost for each segment. Assume a base Calculate the minimum Material Cost per segment using the following Labor cost of $11.20 (51120 is a rough estimate of Labor cost used equation and table below solely to illustrate the Margin Potential Concept) Minimum Labor Cost = ($11.20 - (1.12 Automation Ratings Below)] + Minimum Material Cost = (Lowest Acceptable MTBF *0.30) / 10001 Trailing Edge Position Cost 1 12 Maximum Customer Segment Information Trailing Edge Material Cost Low $1.50 Tech Leading Edge Material Cost Lowest Acceptable MTBF Automation Level (out of 10) Price $8.50 14,000 $35.00 10.0 High Tech $4.00 $10 00 17.000 $4500 60 Margin Potential Contribution Margin Contribution Margin Maximum Price Minimum Material Cost Minimum Labor Cost Name (%) Product Low Tech Eat High Tech The Round 0 Foundation Fast Track