You will observe it is not so Where as for a salesman attached to the branch

You will observe it is not so where as for a salesman

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branch or zone incharge? You will observe it is not so. Where as, for a salesman attached to the branch, expenses incurred in his traveling, you will observe are controllable. Thus in the solution, you will find expenses, which are controllable by the unit heads and those which are not controllable by the unit head. Very broadly the expenses that are controllable would be: RSM, BM, Sales Supervisors’, sales men’s traveling, commission, communication, sales promotion, C&FA (carrying and forwarding agent) expenses, and secondary freight (freight or transportation expenses incurred in delivering goods to distributors). Even where the expenses are controllable or uncontrollable, one can also have a look as to how the unit head is deriving mileage from the expenses being incurred. This we will call as Cost Management. No. of sales force 51 38 70 58 217 Sales force producti vity 75.88 135.00 77.57 51.47 80.25 C and FA 65 56 72 35 228 Stock 516 745 860 285 2406 CFA as percent of stock 0.13 0.08 0.08 0.12 0.09 42
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TERRITORY AND PRODUCT LEVEL PROFITABILITY For Example- In the solution above you will find that on an expense of Rs. 200 lacs incurred by North zone, the total sales obtained is Rs. 38 crores. Whereas East zone has able to get much higher return on sales man salary cost as compared to North zone. Across all the cost you will observe that such evaluation of center heads can be carried out. Certain expenses such as - Vice - president’s Salary and Traveling. General Manager’s Salary and Traveling. Corporate allocated expenses. have to be apportioned to the different centers on some basis. These basis can be 1. In proportion to sales. 2. In proportion to the Gross Margin. 3. Equally to all the centers. 4. In proportion to the number of staff. 5. In proportion to the no. of branches/establishments in each zone. We shall show the allocations on each of the above basis. For that we shall first calculate each zone’s sales as a percent of the total All India sales, to decide the proportion of apportionment. Next we shall calculate each zones gross margins as a percent of the All India gross margins, again to decide the proportion of apportionment. Table no: 4.4 North Zone East Zone West Zone South Zone All India Sales 3870 5130 5430 2985 17415 Sales as a percentge of total Al sales 22 30 31 17 100 Gross 1943.7 Margin 1360.8 1728.9 1093.35 6126.75 Gross margin as a percentge to Al gross margin 22 28 32 18 100 43
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TERRITORY AND PRODUCT LEVEL PROFITABILITY So we find that in respect of sales, north zone contributes 22 percent of total All India sales. This has been calculated by dividing north zone sales Rs. 3870 lacs by All India sales Rs. 17415 lacs, which is 22 percent. Similarly the percentge of the other zones have also been calculated using the same procedure, which shows that east zone contributes 30 percent, west zone contributes 31 percent, and south zone contributes 17 percent of the All India sales.
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