Worked scenario
The margin on the best seller went negative in April
Where inputs move weekly and prices move annually, the product mix quietly shifts towards the least profitable lines.
3 min read
A manufacturer sets prices from a costing built at a point in time. Ingredients move. The costing does not, and the price list moves only when someone forces the issue.
The worst case is a successful product
Volume concentrates on the lines customers like most. If one of those has drifted below cost, growth makes the position worse — and the volume figures look excellent throughout.
Recalculation has to be automatic
If recosting is a project, it happens annually. If recipe costs update as purchase prices are entered, current margin is available whenever anyone looks, which is the only way a threshold can trigger anything.
Mix in margin terms
Most manufacturers know their volume mix precisely and their margin mix approximately. The two frequently point in opposite directions, and only one of them pays for anything.
What changes
- Recipe cost recalculated as ingredient prices change
- Margin per product visible at current input cost
- Price review triggered by margin thresholds, not by calendar
- Volume mix understood in margin terms, not only in units
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