9.5. Using the P&L Template for Decision-Making Analysis
The P&L template (refer to Figure 9-1) serves as a good model for decision-making analysis. To demonstrate, suppose that you're under intense competitive pressure to lower the sales price of one product you sell. This product is one "slice" of the total activity reported in Figure 9-1. Suppose that during the year (2009) you sold 1,000 units of the product at a $100 sales price, and the unit costs of this product are the same as in Figure 9-1.
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Assuming your prediction about sales volume at the lower price is correct and sales volume increases to 1,250 units, and assuming that the variable costs for the product remain the same, next year you would earn $18,750 margin:
$15 margin per unit × 1,250 units sold = $18,750 margin
Cutting the sales price $10 reduces the ...
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