Table no 47 In the table below we can see their comparative parity 5 On the

Table no 47 in the table below we can see their

This preview shows page 47 - 50 out of 203 pages.

Table no: 4.7 In the table below we can see their comparative parity: 5. On the basis of number of establishm ents Net margin based on “5" ie. GM less “5" Net margin based on “5" as a percentge of sales (3) 21.81 1339 34.6 (3) 21.81 1707 33.3 (4) 29.08 1914.6 35.3 (3) 21.81 1071.5 35.9 (13) 94.5 6032.2 5 34.6 Zones Gm as Percentage of sales Nm as percentage of sales on method 1 Nm as percentage of sales on method 2 Nm as percentage of sales on method 3 Nm as percentage of sales on method 4 Nm as percentage of sales on method 5 North 35.2 (3rd) 34.6(3rd) 34.6(3rd) 34.6(3rd) 34.6(3rd) 34.6(3rd) East 33.7 (4th) 33.2 (4th) 33.2 (4th) 33.18(4th) 33.4(4th) 33.4(4th) West 35.8 (2nd) 35.4 (2nd) 35.3(2nd) 35.2 (2nd) 35.2(2nd) 35.3(2nd) South 36.6 (1st) 35.8 (1st) 36 (1st) 36 (1st) 35.8 (1st) 35.9 (1st) 47
Image of page 47
TERRITORY AND PRODUCT LEVEL PROFITABILITY Table no: 4.8 The initial parity between the south zone which is 1st ranking with the 2nd, the 3rd, and the 4th is given in the column A. When we see the parity in the subsequent columns, we can see that in column 2 (where the net margin has been calculated post apportionment of expenses on the proportion of sales), the parity is the closest to the relation in column A. This is the reason why in most of the cases the non center expenses are apportioned on the basis of sales. In the solution to the case provided above, you may have noticed that while the gross margin rates for the products are uniform across the country, some zones have scored better gross margin rates than others. This is due to the zones achieving different product mix. Thus selling more of products having a higher gross margin rate can improve the overall profitability. We shall illustrate this phenomenon by an example. In the table below we are depicting the target set and the actuals achieved by a sales person: Zones Gm as percentage of sales Nm as percentage of sales on method 1 Nm as percentage of sales on method 2 Nm as percentage of sales on method 3 Nm as percentage of sales on method 4 Nm as percentage of sales on method 5 North 35.2 34.6 34.6 34.6 34.6 34.6 East 33.7 33.2 33.2 33.18 33.4 33.3 West 35.8 35.4 35.3 35.2 35.2 35.3 South 36.6 35.8 36 36 35.8 35.9 South/ west 1.02234637 1.0112994 1.01983 1.022727 1.017045 1.016997 South/ north 1.03977273 1.0346821 1.040462 1.040462 1.034682 1.037572 South/ east 1.08605341 1.0783133 1.084337 1.084991 1.071856 1.078078 48
Image of page 48
TERRITORY AND PRODUCT LEVEL PROFITABILITY Table no: 4.9 The sales person involved has achieved Rs. 11000 sales against a target of Rs. 1000 i.e., 10 percent above target achievement. But in gross margins where his target was Rs. 3600 he has been able to garner only Rs. 2650 in absolute amount, which translates to only 24 percent of sales. This is because he has sold more of products A and C which have lesser gross margins, and less of products B and D which have higher gross margins. Thus the sales team should not only sell more, but also concentrate on selling more of products that have a higher gross margin. In the solution to the case above, you would have seen that after apportionment of all the expenses to the different territories, (in this case the 4 zones) we can easily evaluate how each territory has performed.
Image of page 49
Image of page 50

You've reached the end of your free preview.

Want to read all 203 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors