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Math Help - Weighted Avg(?) Margin/Contribution Margin %

  1. #1
    Jan 2011

    Question Weighted Avg(?) Margin/Contribution Margin %

    Operating Plan.xls

    So i've attached a business problem I've been trying to work through.

    It seems to work fine when both Margin and Margin % are going in the same direction (They at least make sense), however in the attached example, when Margin goes up and Margin % goes down, the relationship doesn't seem to make sense.

    For example, Widget G is more favorable than the operating plan, but the margin % is showing negative, where as it would seem that the margin % should be favorable...

    Any help or suggestions would be appreciated.
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  2. #2
    Senior Member
    Nov 2010
    Hong Kong
    Are you trying to do variance analysis? What variance exactly do you need to analyse?

    If looking at act vs planned margin, there are two components here: volume variance (eg you sold less of higher margin products than planned, and more of lower margin product) and margin variance (products did not deliver on their margins). You will need to do these separately, not in one calculation.

    Ie first, analyse volume var * margin var = total sales var (see contribution of each product)

    then you can analyse margin var in % into volume and margin (here I'd rather call it price) and do it on a product level.
    Last edited by Volga; January 26th 2011 at 03:23 AM.
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