Sale discount evaluation
To find out the impact of that on the efficiency of the product and know the value of excess sales to achieve the same profits that were achieved before calculating the discount.
The meant of calculating the discount on the sale price of the product
Calculating the discount on the sale price of the product is the reduction of the value of this price in order to stimulate sales. After that the marketing manager confirms the effectiveness of calculating this discount in the sales promotion.
The objective of evaluating calculated discount on the selling price of the product
1 - knowing the effect of this discount on the efficiency degree of the product and therefore the special Administrative constitution of the company , which is guided with in the management of the company.
2 - knowing the extent of the ability of the marketing manager to market excess sales value which required to be sold to achieve the same profit , which was achieved before calculating the discount on the selling price.
Evaluation requirements for calculating the discount on the sale price of the product
Data entry form includes the required elements to prepare an evaluation of calculating discount on the selling price of the product as the following :
In case of preparing an evaluation of calculating discount on the selling price for one product
1 - The value of the sale price of the product per unit before discount
2 - The value of the sale price of the product per unit after discount
3 - The value of product cost per unit
4 - The share of the product ( for example A ) from general and administrative expenses, including depreciation for the full year
5 - The share of the product ( for example, A ) from total fixed and current assets.
6 - Choose the degree of efficiency of the preparation of the budget which is targeted to achieve.(Good degree is the start point of safety - or very good degree - or high very good degree).
Example
1 - The selling price of the product ( A) before discount = 12 pounds
2 - The selling price of the product ( A) After Discount = 10 pounds
3 - The cost of the product ( A) = 8 pounds
4 - The share of the product ( for example A ) from the total general and administrative expenses including depreciation for full year , which amounted to 600,000 pounds estimated 200,000 pounds.
5 - The share of the product ( for example, A ) from total fixed and current assets. which amounts to 2500000 pounds, it is estimated 833 333 pounds.
6 - The company targeted to achieve a budget of good degree.
The evaluation result of calculating the discount on the sale price for one product
For the efficiency degree of the product
The product achieved degree of efficiency very good after the calculation of the discount on the selling price where the efficiency degree of product declined from excellent to very good as a result of this discount and thus the special administrative constitution of Company is changed which is guided with on its management in terms of:
A - Quantity produced : The company needs to produce more than the quantity produced previously to achieve the same profit previously.
B - The position of the company's products if its cost increased: The sale price of the new after discount is still able to absorb the increase in cost.
C - For customers facilities: Facilities can be given to customers, provided that company provides liquidity without having to borrow due to increased sales volume.
D - For bank credit: It has become dependent on the company's ability to market the total excess value of sales resulted from discount and credit.
E- For general expenses: Workers can be granted by granting the bonuses to motivate them to increase the company's productivity.
First: budget of good degree before calculating the discount on the selling price
Sales value = 912,499.86
(-)The value of purchases= 608,333.24
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Gross Profit = 304,166.62
(-)expenses= 200,000
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Net profit = 104,166.62
Second: Budget of good degree after calculating the discount on the sale price
Sales value = 1,520,833.12
(-)The value of purchases =1,216,666.50
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Gross Profit = 304,166.62
(-)expenses= 200,000
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Net profit = 104,166.62
Third, the excess value of sales
1 - The value of sales after discount = 1,520,833.12 pounds.
2 - The value of sales before discount = ( 912,499.87 pounds )
3 - The excess value of sales as a result of discount and required to be marketed to achieve the same profit before calculating the discount = 608,333.25 pounds In case of the marketing manager is able to market this increased value (608,333.25 pounds) as a result of the discount in addition to the value of sales before the discount ( 912,499.87 pounds ) then this company depends this discount unless it should re- attempt to grant the discount worth less in the case of the inability to market the excess value of sales.
In the case of evaluation of calculating discount on the sale price of the more than one product
1 - The sum of the prices of these products before discount
2 - Sum of the values of the prices of these products after discount
3 - Sum of the values of the costs of these products
4 - Total general and administrative expenses , including depreciation for the full year for these products.
5 - Total fixed and current assets for these products
6 - Choose the degree of efficiency of the preparation of the budget is targeted to achieve ( Good degree is the start point of safety - or very good degree - or high very good degree)
Example
1 -The selling price of the product ( A) before discount = 12 pounds
The sale price of the product ( B) before discount = 20 pounds
The sale price of the product ( C) before discount = 26 pounds
Total price values of the company's products before discount = 58 pounds
( enter in the data entry form )
2 - the sale price of the product ( A) after Discount = 10 pounds
The sale price of the product ( B) after Discount = 19 pounds
The sale price of the product ( C) after Discount = 24 pounds
Total price values of the company's products after discount = 53 pounds
( enter in the data entry form )
3 - The cost of the product ( A) = 8 pounds
The cost of the product ( B) = 17 pounds
The cost of the product ( C) = 21 pounds
Total costs values of this company's products = 46 pounds
( enter in the data entry form )
4 - Total general and administrative expenses , including depreciation for the full year, which amounted to 600,000 pounds ( This value is included in the data entry form )
5 - Total fixed and current assets, which amounts to 2,500,000 pounds ( This value is included in the data entry form )
6 - The company targeted to achieve a good degree budget
Evaluation result of calculating the discount on the sale price of products
For the degree of efficiency of the product
The company achieved a good degree of efficiency of the products after calculating discounts on the sale price fell as the efficiency degree of products declined from very good to good results from this discounts and thus special administrative constitution of company which is guided with is changed in terms of:
A - Quantity produced: The company needs to produce a large amount rather than a limited amount to achieve the same previously profit.
B - The position of the company's products if cost increased: The new sale price after the new discount that can accommodate the increase in cost, rather than that it was able to absorb this increase.
C - For customers facilities: Facilities can be given to customers , provided the company provides liquidity without having to borrow due to increased sales volume rather than after giving this discount without conditions.
D - For bank credit : It has become dependent on the company's ability to market the total excess value of sales of both discount and credit
E- For the general expenses: It must scrutinize the terms of these expenses so as not to fall in the company's wasteful.
First: Budget of good degree before calculating the discount on the selling price
Sales value = 4,410,416.66
(-)The value of purchases =3,497,916.66
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Gross Profit = 912 500
(-) Expenses = 600000
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Net profit = 312500
Second: Budget of good degree after calculating the discount on the sale price
Sales value = 6,908,928.57
(-)The value of purchases= 5,996,428.57
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Gross Profit = 912 500
(-) Expenses = 600000
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Net profit = 312500
Third, the value of excess sales
1 - The value of sales after discount = 6,908,928.57 pounds
2 - The value of sales before discount = ( 4,410,416.66 pounds )
3 - The value of excess sales as a result of the discount and required to be marketed to achieve the same profit before calculating the discount = 2,498,511.91 pounds In the case of marketing manager is be able to market the value of this increase (2,498,511.91 pounds ) as a result of the discount in addition to the value of sales before the discounts ( 4,410,416.66 pounds ) then this company depends this discount unless it should re- attempt to grant the discount worth less in the case of the inability to market the excess value of sales.