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Gross margin
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Hi there,
If you know the percentage of revenues of each division, you should be able to get it by multiplying the gross margin of each division times the percentage of contribution of revenues of that particular division out of the total.
Example:
- Division A
- Gross profit: 10
- Revenues: 20
- Margin: 50%
- Division B
- Gross profit: 15
- Revenues: 20
- Margin: 75%
- Division C
- Gross profit: 20
- Revenues: 50
- Margin: 40%
Total revenues are 90.
You can get the overall margin as:
50%*(20/90)+75%*(20/90)+40%*(50/90) =50%
Indeed you can check we get the same result as calculating the overall company gross margin:
- Overall
- Gross profit: 45
- Revenues: 90
- Margin: 50%
Hope this helps,
Francesco
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Hi there,
Just to add to Francesco's answer, the other option would be to multiple it by volumes. As in, if you know how many units are sold in each.
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Thanks, are there any good resources to practice math questions like these?
Hi there, there is a math tool here on PrepLounge that you can try. Besides that, you can go through some good casebooks (eg Insead) and do the math part of the different cases – that should be pretty close to the possible questions in the math part. Hope this helps!