Results
As previously discussed, contribution margins identify how much is available from the sale of each unit that can be used to pay for variable cost and fixed costs and still provide a profit for the company (Merritt, 2014). While conducting research and completing the Capsim Management Simulation experiment, quantitative data has been assessed to aid in determining if a high contribution rate leads to profitability. Using the Capstone Courier Report data for years 2014- 2022 (simulation rounds 1-8); team Chester had the following contribution margins which are presented in the graph and table provided below. Figure 2: Contribution Margin results
Table 1: Team Chester’s Contribution Margin calculation Sales Variable Cost Contribution
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This paper attempted to explain Chester’s Capsim results in relation to high contribution rates leading to profitability in a simulated business. Chester’s results illustrated that high contribution rate leads to profitability. Research suggests that practices designed to increase the contribution margin will likely result in improved profitability, liquidity and debt structure. Chester agrees with results in this study because Chester managed to strategically make decisions that allowed the company to finish the competition with zero debt and profit. Maintaining major investments in product segments, pricing modification and increased marketing raised the variable cost each year but it assisted in increasing the contribution margin and profits because customers were buying the updated products for each segment. For instance, in round 0 Chester started the simulation with a contribution margin of 28.3% which was calculated by selling $101,073,437 in merchandise and spending $72,513 in variable costs but after making decisions in regards to product segments, pricing, and modification, etc. the variable cost increased to $88,183 which led to increasing sales by $25,830 to earn $126,903 in round 1. This also resulted in a 2.2% increase of the contribution margin to 30.5% from round
We have cumulated a profit of $206 million over this period, second of the industry. Our goal of escalating profit has advised us to increase automation level and for cutting costs, which enabled us to have the margins of all products above 30% in 2019 and an average margin of 53.4% in 2024. Additionally, we invested to keep our products updated to the market trend with an attention to customer buying criteria. Moreover, starting from recent years, we run our full capacity with second shifts whenever the market need has a possibility to accommodate our production. To achieve a greater profit, we based our pricing strategy on the market movements in general by decreasing our price by $0.50 every year except for our Low End product-Acre.
MCI's capital requirements for the next 3 years are x,y and z. (see exhibit A). These values are based on a number of different assumptions. (See exhibit B). The forecast is not without a level of uncertainty. Specifically there are regulatory decisions where the outcome is not clear at this time. This could impact profit margin plus or minus seven percentage points. (See exhibit c)
As competition intensifies and pressure from retailers to get better margins increases, Clique Pens’ margins have dropped 6% in the past 3 years. Trade deals for retailers are the main reason our margins have steadily shrunk and our customers are not getting the benefits. Market development funds (MDF) are the key to bring our margins back up, while keeping retailers happy and their margins intact, we can increase our profit margins by 3%, to 2011 levels, while giving our customers a better deal.
1. Context: In early September’08 Giant Consumer Products, Inc. (GCP) realized that Frozen food division, which had been growing at 2.8% (compounded annual growth) rate since 2003 to 2007 and accounted for almost 33% of GCP’s overall business volume, is not doing well now. The sales as well revenue volume is around 3.9% behind the target. Most specifically marketing margin (key parameter for GCP business) was also under plan by 4.1%. GCP had been doing well in wall-street but performance of past couple of quarters has increased the worries of GCP i.e. whether GCP will able to maintain its profitable growth.
Each division’s performance had been judged on the basis of its profit and return on investment for several years. The said practice creates competition among the company’s divisions because each makes sure that it is more profitable than the others. As such was the case, there was high possibility that one division was enjoying profit at the expense of the other(s).
Hammond Cards, Inc. is a small player of the greeting cards industry in the United States of America due to the fact that their annual revenues equate to less than 1% of the industry leaders as described in the case. In their effort to stimulate growth, however, Wendy Hammond has employed me to analyze the potential acquisition of another company, Creative Designs. My analysis will firstly look at the main issue behind this acquisition and then further break it down into sub-issues that I will address individually. Since both of these companies follow a different strategy I will evaluate the two different companies and discuss the implications of their strategies on the merger. I will then perform various cost analysis to determine the cost structures of the two firms which will help me identify whether Wendy’s intentions can be carried out. In my analysis I will aim to figure out the practical capacity of the firms and get an indication on whether their current operations are using the optimal level of capacity and minimizing waste. This data will help me with my strategic recommendation of acquiring Creative Designs and fitting it in with the current strategy of Hammond C...
Harvard Business School case 274-116. Cooper Industries, Inc. Retrieved on August 31, 2008, from University of Phoenix, Resource, FIN/545 web site: https://mycampus.phoenix.edu/secure/resource/resource
Supply and demand plays an intricate role in the amount, price, and availability of products and services. The applying supply and demand concepts simulation guides users through making decisions for Goodlife, a management company for 2 bedroom apartments in Atlantis. The simulation names the user the property manager; responsible for vacation residents, new pricing for units, and advertising. The property manager makes decisions in circumstances including the changing of supply cure, demand curve, microeconomics, macroeconomics, and the equilibrium of price and quantity. All of these decisions move the business along as conditions change around it.
While analyzing the data for The Body Shop International case, I noticed some trends and have compiled my assumptions for the next three years. I have compiled pro-forma statements for the fiscal years 2002, 2003 & 2004. These figures are based on the percentage of sales method for pro-forma financial modeling. Simply put, I used the sales figures from the past three years 1999, 2000 & 2001 and applied a growth rate of 13% increase to sales. Below are some additional assumptions that I have created to illustrate how the firm can become profitable while increasing market share and maintaining stockholder interest within the firm over the next three years.
Signode Industries Inc. - Providing Packaging Solutions Executive Summary SIGNODE INDUSTRY: DILEMMA AT HAND: Mr. Gary Reed, President of Signode Industries packaging division, is in a dilemma as what he should be his course of action to meet the 6.8% increase in price of cold rolled steel- the raw material used in manufacture of Signode’s primary product, steel strapping. There are few options given in the case: Increase Signode’s strapping prices to offset the increased price of cold – rolled steel. Maintain Signode’s current book prices as increasing prices would affect sales force morale. Introduce price-flex model as proposed by Jack Davis i.e. a kind of selective discounting or premium charging for customized services. Recommendations Reason: (All data in accordance to 1983) In accordance to Exhibit 1: Sales of Packaging Division of the company = $285,950 In accordance to Table A: Sales of Apex = 33.3% of $285,950 Sales of BBM = 26.8% of $285,950 Sales of HDM = 33.4% of $285,950 Sales of Customized Products = 6.5% of $285,950 In accordance to Exhibit 4: Similarly, For Apex: As it has a capacity utilization of 71% now, Suppose a sale is $100. Then contribution is $39.15 Therefore variable cost is $60.85. Now if we increase the capacity utilization to 100%, Sales becomes $ 141 since production increases by [(100-71)/71] * 100 = 41% Variable Cost = 141% of 60.85 = $85.8 Fixed Cost = 69.38% * 12.3 = $8.53 Total Cost = 85.8+8.53 = $94.33 EBIT = Sales – Variable cost – Fixed Cost = $46.67 % of EBIT = [(46.67/141) * 100] = 33.09% Suppose the company sales 100x units, the total cost was 69.38. Thus per unit cost was .6938. Now the company sells 141x units, the total cost...
I am not going to lie this class was my hardest it felt like I didn’t know what was going on at all time. It not like I wasn’t learning anything in there is just that I didn’t really get the class at all. Every time went on Capsim to do work I never get anything do because I didn’t know what I was doing. Is not like I didn’t like the class the class I just us doing the Capsim online was hard for some people because they didn’t know what to do. Next semester I think the class should be thought like microeconomic because more people we will it better. Another idea I was thinking was we could do a field trip to some business meetings even though I know students in college don’t do feel trip. The feel trip will give us an ideal of what a real
Cosmo-cosmetics Co. uses $0.246 out of every sale dollar to cover variable expenses, leaving $0.753 as a contribution margin to cover fixed costs and make a profit. (Note: 75.3% is the contribution margin as a percentage of sales)
Every company has some kind of Revenue and they all have costs that are associated with running the company. It is also true that if a company wants to increase their Revenue, their costs will increase too. It is every company’s goal to maximize revenue and either through Production or Services, and minimize cost. These things are easy to figure out, but actually identifying the production and figuring out how it will increase or decrease with change is very difficult.
Russel Y., Topper S., Akerman L., Oliveira J., Strydom Z.; 2013; Studying Business NSC Business Studies Grade 12; 2013 Edition; Paardekraal; Excom Publishers; 26/05/2014
Never have I ever climbed a mountain peak. As a child, I imagined myself conducting expeditions in deep-frozen pathways, leading amateur explorers to the top of the world, and instructing rookies in surviving harsh blizzards. Even though slightly altered, my childhood dream has been achieved. I led a team of fellow classmates, in my Strategic Management course, to the success summit of a financial competition. Over the course of a semester, I and my teammates were supposed to create and manage a company of the IT industry, in a computer-simulated environment, along with other four rival teams. I dealt with strategy and financial matters of our virtual enterprise, while my colleagues were working on marketing and manufacturing. During the four months of the exercise, I have experienced finance from various aspects: capital budgeting, through selecting favorable investment for upcoming quarters; debt management, by assessing the necessary amount and efficiency of loans; profitability analysis and dividend policy, which had been used to compile the company’s general performance index. Working in a multinational team, which included an American, a Norwegian and a Moldovan, strengthen my negotiations skills, as well as flexibility and cooperation. But above all, this experience intensified my passion for finance. Of course, a pleasant bonus was the fact that, in the end, our company’s financial performance was six times the performance of second-best team.