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DiscoZombie
Registered User regular

So let's say I work for a distributor. Let's say I have a database of product sales and costs. Let's say this was one row of data in the table:

'09 sales: $100,000

'10 sales: $110,000

'09 cost: $50,000

'10 cost: $60,000

Sales increased 10%. Cost increased 20%. How do I arrive at a dollar figure that shows how much of the sales increase was due to the cost increase? I feel like this should be real easy but you wouldn't believe how much time I've spent thinking about it and trying to run hypotheticals in Excel, trying to get the answer to jump out at me and make sense... would it be (sales increase) / ('09 cost) * ('10 cost)? or something like that? Is there enough given information to answer the question? Is the question clear enough? I'm at a loss.

'09 sales: $100,000

'10 sales: $110,000

'09 cost: $50,000

'10 cost: $60,000

Sales increased 10%. Cost increased 20%. How do I arrive at a dollar figure that shows how much of the sales increase was due to the cost increase? I feel like this should be real easy but you wouldn't believe how much time I've spent thinking about it and trying to run hypotheticals in Excel, trying to get the answer to jump out at me and make sense... would it be (sales increase) / ('09 cost) * ('10 cost)? or something like that? Is there enough given information to answer the question? Is the question clear enough? I'm at a loss.

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## Posts

Thanatosonmaybe you're right though and there's not enough information. What *would* be enough information? because I do have access to all the transactional info. So I know the number of units and cost and sales price at each sale. I just don't know the right way to aggregate it to properly answer this question. Now that I think about it, I guess units are probably an important factor, because if you know that total costs incurred went up from $50k to $52k, you don't know how much of that $2k increase was due to actual cost increase and how much was due to increased volume. My brain hurts.

DiscoZombieonstarmanbrandonThere's no telling whether that figure means anything, though. I'm no accountant.

FunkyWaltDoggonI'm saying that, when the cost of a product is increased, the sales price of the product is also proportionally increased so that the profit margin we make per item stays the same (not always true but a safe assumption). So, with that assumption, and assuming the same number of units were sold both years, if the cost increased 20%, the sales would also increase 20%. So yeah, if cost did nothing, sales would also do nothing, in this scenario.

DiscoZombieonTeslan26onDude, I think you might be right - it may just be that simple... thanks! and yeah, I couldn't tell you whether that figure means anything either, and neither could my boss. Our department isn't generally involved with financial data. But whatever, he asks me to develop this report and here I am -_-

DiscoZombieonToday is actually the last class of my MBA program so while I haven't done any problems specific to a "cost/sales ratio," it's a pretty common "quick analysis" to do stuff like that. Basically what you're doing is saying "Alright, this is the ratio for last year. And this is the ratio for this year. If we keep the numbers the same, you can see that we had fewer sales had costs remained the same."

Of course then you do a deeper cost analysis to see if that actually is true, but yeah, you're basically just doing an easy ratio for sake of comparison.

EggyToastonsomeoverhead, and you're going to need to take that into account to get a useful number, I think (it's been awhile since I took accounting).Thanatoson