Hello,
I was hoping someone could help me figure out how to solve these problems without using 100 or 1000 as an arbitrary value for revenue. Could you please explain an assumptions in your calculation and how you would go about solving this.
Problem #1
- Clients Profitability is (10%)
- Competitors Costs are 20% less than the client.
- Competitors Price is 10% less than the client.
-------- What is the competitors Profitability?
Problem #2
Cost Structure of the Client
- 70% Raw Materials
- 20% manufacturing/automation
- 10% personnel
------- By how much should raw materials decrease for our client’s profitability to be the same as the competitors?
Thank you!
Thank you for your response. I was wondering if there would be a way to calculate this without taking an arbitrary price, just using the percentages?
Yes: notice that I chose 100 as an arbitrary price both because of your initial request and to show you this is possible to do with percentages only: with price = 100 percentages are the same figure (just add % to those numbers and you find the % version of this solution)!