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How to calculate gross profit when the retailer margin is blank?

Case consulting Question
Edited on Sep 01, 2020
2 Answers
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Anonymous A asked on Aug 29, 2020

I'm not sure how to calculate the gross profit for the Seasoned Rotisserie when there is a "?" on retailer margin - the answers / process on the casebook are a little unclear too. I know that for the standard rotisserie you get gross profit by multiplying retail price (3.33) x retailer margin (0.30) x number of sales (1000/3.33 = 300) to get $300, which seems to be right according to the casebook. However, I just don't know how to solve for the gross profit for the right column on seasoned rot. chicken... especially the question mark is confusing me. Any help would be super appreciated, thanks a lot guys.

(This is from the Kellogg 2011 casebook, case 7 Rotisserie Chicken if that helps)

Kellogg 2011 casebook, case 7 Rotisserie Chicken

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Anonymous replied on Aug 31, 2020

Hey! This is really a typical question that, if you are familiar with, it will increase your chance get an offer. Let's structure this.

PART 1
I checked the prompt on the case book. Another exhibit showed that: the retailer margin is 25%

PART 2
Retailer profit for Seasoned Chicken compared to Standard Chicken
Retailer profit = # of chickens sold * (price per chicken * retailer margin per chicken)

Standard Chicken (total profit for retailers = $300 + $600 = $900/week)

  • Store A: $1,000 (weekly sales) * 30% (retailer margin) = $300 overall profit
  • Store B: $2,000 (weekly sales) * 30% (retailer margin) = $600 overall profit

Test Market BBQ Seasoned Chicken (total profit for retailers = $400+ $675= $1,075/week)

  • Store C: $1,600 (weekly sales) * 25% (retailer margin) = $400 overall profit
  • Store D: $2,700 (weekly sales) * 25%* (retailer margin) = $675 overall profit

FORMULA

  • Profit = Revenu * margin
  • Profit = Revenu - Cost
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Anonymous A on Aug 31, 2020

Hey, thanks for getting back to me :) I did see the other graph where margin was 25% for pre-seasoned chickens, but I wasn't sure if the "?" labeled margin would be 25% or 30%. Why would it be 25% ( the margin on the previous graph) and not 30% (the margin for standard rot?) Thank you!

Anon on Apr 23, 2022

But Exhibit 2 shows different values for weekly sales than what you have here. Store 1: weekly sales of $1200 Store 2: weekly sales of $2400 I'm really struggling with this case

Ian
Expert
Content Creator
updated an answer on Sep 01, 2020
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hi there,

This is a really great lesson for the following two points:

1) Pay attention to all information provided to you. Make sure you write down + note all important pieces of information. Keep them organized, and make sure to scan through your notes any time you think a piece of information is missing...it might not be!

2) When in doubt, ask (smartly). If you clearly don't have a number when you need one, just ask! However, when you ask, lead with something. In this case, you could say: "So I see that standard rotisseries carries a quite impressive margin of 30%. I assume that the premium rotisserie would carry an even higher margin given that it is a luxury product. Do we have numbers on this? Perhaps 50%?"

(edited)

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