PROFIT MARGIN MANAGEMENT This is going to illustrate the impact on Net Profit of an organization when Marketing Management manipulates key variable such as Unit price, Sales Volume, Cost of Goods Sold and Operating Expenses. You will manipulate each of these TOOLS and recalculate the Net Profit. Read the top of each column to see how much you will change each variable and fill in the blanks of each column. *For each column calculation, always go back to the first column, Current Figures to calculate those indicated changes. These are all independent decisions to see the impact they have on your profit margin. Note that in the Sales Volume column you will increase your original net sales (in the current figures column) by 10% BUT it costs money to make money so you will also have to change your COGS by the same %. 8. IMPACT OF PROFIT MARGIN TOOLS Current" Figures Price Increase by 10% Sales Volume Cost of Goods Sold Increase by 10% Reduce by 2.5% Op. Expenses Reduce by 11% Net Sales Less: COGS $1,000,000 1,020,000 800.000 800,000 1,000.000 1.000.000 800.000 Gross Margin 200,000 Less: Expenses 180,000 180.000 180.000 180,000 Net Profit 20,000 Fill in the blanks: 1. A 10% increase in price resulted in a % increase in net profit. A 10% 2. A 10% increase in sales volume resulted in a % increase in net profit. 3. A 2.5 % reduction in cost of goods sold resulted in a % increase in net profit 4. An 11 % increase in price resulted in a % increase in net profit. You will notice a trend here. Just by making a managerial decision on any of these tools, you will see the significant impact it has on your bottom line - your profit