What is: the analysis of products by turn of sale is a very practical instrument that seeks to answer the following question:
Which product is bringing the most cash return to my business?
Why use: Whenever you need to analyze the profitability brought by a product, based on both the contribution margin and the turnover per month. Only then will you get a sense of the total contribution of your products and can do a comparison. Some products that have a lot of margin, sell little and other products with little margin, sell a lot. It is important to know and evaluate this information to make business decisions.
How to analyze: concentrate in a spreadsheet the data that will allow to know the total contribution of each product. Name the following items in columns:
1. The name of the product;
2. Each input needed for manufacturing, creating one column per input;
3. Labor costs;
4. Sales price per unit;
5. Total units sold.
The amount related to items 2 and 3 generate the variable cost of the product. When entering the data related to the sale of the product in the month, you can calculate the contribution margin, absolute and percentage. THE contribution margin is the money left over from the selling price of the product, after decreasing the variable unit cost (variable cost per unit minus variable expenses). The percentage refers to the contribution margin index, which is the margin divided by the selling price. Here's how it would look in an example:
Analyzing product by product can help identify which are the best and worst products, according to their contribution margins, that is, what each of them actually generates for the company cashier. You can even create a ranking of these products, in relation to the total contribution margin and percentage.
A spreadsheet should be applied when you want to know what products offered by your business actually have a higher sales success rate, that is, more cash. Thus, you can point out the exact profitability - or lack of - from each product, which will aid in the conduct of your business, aiming to reach the financial equilibrium point. All this through measures such as: inventory renewal, product prioritization or even investment decisions.
Want to find out right now which product generates more revenue for your business? The break-even analysis worksheet created by LUZ can help. Download and start tracking this important business metric!