BU121 Lecture Notes - Lecture 10: Gross Margin, Contribution Margin, Variable Cost
Document Summary
You have the opportunity to produce in a different country with a lower wage rate that would decrease your variable cost from 10 to 5 per unit. This would further allow you to drop your price from 60 to 45 and you believe that would increase your volume from 200 to 300 units. 60 price 10$ variable = 50 contribution x 200 units = 10000 total contribution. 45 price 5 variable = 40 contribution x 300 units = 12000 total contribution. What tool do i have that would help me make a decision? (why) How do i interpret the answer/use it to make a decision? (how) Inventory turns (dont want it sitting there, you want it moving), Gross margin (what is left after you actually make it), Qualified leads (acquistion, retention, revenue, viral coefficient spread to other people) Lifetime customer value (lcv: should be higher than what it costs you to get the customer.
