Use this program to analyze profits based on an item’s sales/price/cost curve. By highlighting the interrelationship between price, cost and gross margin, and indicating how sales must be affected to maintain the same total gross margin, the user is better able to determine the optimum selling price.
Changing almost any of the two fields below affects the information and other rows and columns. Entering unit sales projections displays the total gross margin in dollars and margin.
For example, an item costing $4 and selling for $5 has a gross margin of $1 or 25% (depending on the GM % basis flag in the company control record - set to C-cost for this example). To determine the effect of lowering the price just $.25 to $4.75, simply change the new price to $4.75, or enter the new GM as $.75. The resulting display shows the new GM % to be 18.8%, the change in price to be 5%, yet sales must increase 33.3% to retain the same total dollar profit!
This inquiry does not maintain or retain any data in any files. The old and new costs are set to be the same for each item as it is displayed. The user enters the fields to be changed for analytical purposes.
To access this program, choose Inventory Control-->Inquiries -->Profit Analysis Inquiry.
1. Warehouse
Enter the warehouse. The entry must be a valid warehouse code. Press Enter (CR) to default to the warehouse assigned to the terminal.
2. Item
Enter the item. The entry must be a valid item number. Press Enter (CR) to default to the first item on file in the warehouse.
3. Item by Item
Open the Item file or scroll through items to analyze profits.
In the browser in the portion of the screen, the system displays the cost and price of the item, the gross margin and percent gross margin, the selling unit for the item and the item profit. To change the Cost of Item, Price of Item, Gross Margin, Gross Margin %, Units Sold, or Profit values, highlight the line in the browser and click one of the following buttons:
Old—to change the Old Cost of Item, Price of Item, Gross Margin, Gross Margin %, Units Sold, or Profit values.
New—to change the New Cost of Item, Price of Item, Gross Margin, Gross Margin %, Units Sold, or Profit values.
Change—to enter the dollar change for value for the Cost of Item, Price of Item, Gross Margin, Gross Margin %, Units Sold, or Profit values.
% Change—to enter the dollar change for value for the Cost of Item, Price of Item, Gross Margin, Gross Margin %, Units Sold, or Profit values.
In the lower portion of the screen, the program indicates the percent increase in sales needed to maintain the current gross margin based on the information you entered.
When you have completed profit analysis, press the Done button to exit the program.