Question

A distributor sells beverages for $64 to a retailer who then prices the beverages based on...

A distributor sells beverages for $64 to a retailer who then prices the beverages based on a 25% markup. The distributor buys the creates from a beverage producer at a price that provides the distributor at 29% margin. If the variable manufacturing cost for the beverage producer is $15 per crate, what is the beverage producer's margin %?

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Answer #1

Calculation of purchase price of distributor:

Selling Price * (1-Margin) = $64 * (1-29% )

= $45.44

This will also be selling price for producer.

Contribution Margin: Contribution Margin is when you deduct all connected variable costs from your product's price, which results in the incremental profit earned for each unit.

As in the question above, only varibale manufacturing costs for the producer, hence we are calculating contribution margin.

Contribution margin % =(Sales - Variable expenses) / Sales

= (45.44-15)/45.44 = 66.99%

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