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gross profit margin planning

Roland Berger Case: Onlinestar
New answer on Jan 15, 2024
182 Views

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.

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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)

Hi there,

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