Lesson Overview
In this lesson we will go over the core functions and processes in Profitability and Sales Accounting. The core modules in management accounting that support these business processes are Margin Analysis, which provides insights in the performance of the company per market segment and Profit Center Accounting which gives a more internal view of the profitability per department.
Business Scenario
The main business your company is involved in is the production and sale of forklifts. Your company just started selling direct through your own web shop in addition to your standard network of distribution partners. As this is a new venture you want to pay extra attention to many key performance indicators related to your web shop, including the effect on the sales of each forklift model on your partner network. The best tool to track and analyze these types of metrics is Margin Analysis.
Margin Analysis
It‘s important to know what you earn by selling your products. As you already know, Margin Analysis collects all incurring costs and revenues. It analyzes the operating result of a company with an external focus to the market. In this chapter you learn more about how data is processed and analyzed in Margin Analysis.
The interactive figure below shows an example of a contribution margin scheme. In the current period, 100 fork lifts have been sold to customers. The report contains the sales revenue less the variable costs.
The resulting contribution can be used to cover fixed costs (such as rent). Once the fixed costs are covered, any excess is considered as earnings (operating profit).