gross profit margin planning

Question

Hello, I have a question:

the first measurement is to remove products from lower 5 € category, which makes up 15% of sales volume in year 3. After removing this 15%, we donnot know, how this 15% were compensated by products from the other 4 categories ( the exact percentage change is unknown).

In the calculation of the gross profit margin planning, it is calculated based on the percentage distribution from year 3. However, to get 100% in total, don't we need the exact changed percentage of the rest 4 categories at first, then calculate the gross profit margin?

We removed the category lower 5€. So the situation changed. I do not understand the logic of the gross profit margin calculation based on data from year 3. 15%+10%+30%+40%=85%, not 100%. This is a problem.

Answer 1

Hi Yiqing,

The case uses the same distribution percentages because it is based on the same total sales number (EUR 590m) that still includes the sales portion of the <5 EUR category.

You could use a new percentage distribution, but you would have to adjust the sales to exclude the <5 EUR category (i.e. EUR 510.5M = 590 - 88.5)

I added a table below with the detailed view for your own reference, if helpful.

Answer 2

Yiqing,

I see you already received a great answer.

Sharing an additional resource that you might find helpful - a collection of the most common terms that show up in case interviews:

Expert Guide: The Must-Know Consulting Terms for Interviews

Good luck!
Cristian

Answer 3

Hi there,

Lucas gave a great answer already!

Highly recommend you keep practicing, especially using rocketblocks. Remember also here that breaking down the problem piece by piece is key to solving it!

Answer 4

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Answer 5

Hi there, Could you flag the exact point in the case which you are referencing? In general, where data is provided, y... (read entire answer)

Hi there, Could you flag the exact point in the case which you are referencing? In general, where data is provided, you cannot assume. Where data is NOT provided, you can estima... (read entire answer)

Answer 6

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