Prepare comparable SKU records
Records and scope
- Choose one period, currency and indirect-tax basis for every SKU. (not complete)
- Reconcile unit revenue and all variable costs inside the same contribution boundary. (not complete)
- Keep SKU-specific channel, fulfilment and return costs separate where they differ. (not complete)
- Record baseline and proposed units for each SKU, including zero-volume rows that matter. (not complete)
- Reconcile total revenue and total contribution to the selected records. (not complete)
- Record stock, supplier, capacity and demand assumptions outside the arithmetic. (not complete)
Review contribution, volume and mix in order
- Calculate unit contribution for every SKU on the same cost boundary.
- Multiply unit contribution by baseline units to reconcile baseline total contribution.
- Calculate each SKU contribution margin without using it as a substitute for total contribution.
- Enter proposed units and compare total revenue, total contribution and weighted margin with baseline.
- Trace the change to price, unit cost or volume mix instead of relying on a single ranking.
- Stress-test the SKU or assumption that drives the largest change.
- Check inventory, supplier, channel and capacity constraints before adopting the proposed mix.
Unit contribution = unit revenue - unit variable cost; total contribution = sum of unit contribution × units; weighted margin = total contribution / total revenue
- unit contribution
- Amount retained by one SKU unit before costs outside the stated boundary (currency units per unit) — derived from business records or user scenario
- unit revenue
- Revenue for one SKU unit on the selected basis (currency units per unit) — business record or user scenario
- unit variable cost
- All variable costs included consistently for one SKU unit (currency units per unit) — business record or user scenario
- units
- Units sold or entered for the selected period (units per period) — business record or user scenario
- total contribution
- Contribution from all included SKU rows at entered volumes (currency units per period) — derived scenario
- total revenue
- Revenue from all included SKU rows at entered volumes (currency units per period) — derived scenario
- weighted margin
- Total contribution divided by total revenue for the same mix (percentage) — derived scenario
Work a product-mix scenario
Higher weighted margin, lower total contribution
These neutral values are user assumptions in currency units. They illustrate the interpretation and do not forecast sales.
| SKU | Unit revenue | Unit variable cost | Unit contribution | Contribution margin |
|---|---|---|---|---|
| SKU A | 50 | 30 | 20 | 40% |
| SKU B | 100 | 50 | 50 | 50% |
| Scenario | SKU A units | SKU B units | Total revenue | Total contribution | Weighted margin |
|---|---|---|---|---|---|
| Baseline | 100 | 50 | 10,000 | 4,500 | 45% |
| Proposed | 40 | 60 | 8,000 | 3,800 | 47.5% |
Reconcile totals and operational constraints
| Checkpoint | Pass condition | Stop condition |
|---|---|---|
| Cost boundary | Every SKU includes the same cost classes | A row uses a different scope |
| Totals | SKU rows reconcile to revenue and contribution records | A material difference remains unexplained |
| Volume | Proposed units have a stated scenario basis | The result is presented as a forecast |
| Operations | Stock, lead time and capacity are checked | The proposed mix cannot be supplied or delivered |
Methodology sources
- Product Mix Profit methodology — Margin101: Product-owned unit, total and weighted-margin formulas and boundaries.