Maintain target margin with fixed costs

Q: Maintain target margin with fixed costs

This question evaluates the ability to model profit margins by combining revenue, variable costs from a mixed-product portfolio, and fixed costs using algebraic manipulation and basic cost-accounting concepts for a Data Scientist role.

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Question

Target Profit Margin With a Mixed-Product Portfolio

Context

You sell two burger products (classic and vegan) at the same price but with different unit costs. Year-2 fixed costs are known, and the sales mix between products is fixed. You want to find the total number of burgers to sell in Year 2 to achieve a target profit margin.

Given

Target profit margin (Year 2): 34.43% = 0.3443
Prices and unit costs:
- Classic: price = $4, unit cost =$ 1
- Vegan: price = $4, unit cost =$ 2
Sales mix (vegan : classic) = 2 : 3
Year-2 fixed costs (F) = $375,000,000

Task

Let U be the total number of burgers sold (all products combined). Using the definition

margin = (revenue − variable cost − fixed cost) / revenue,

derive and solve for U such that the margin equals 34.43%.

Maintain target margin with fixed costs

Target Profit Margin With a Mixed-Product Portfolio

Context

Given

Task

Solution

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Maintain target margin with fixed costs

Overview

Target Profit Margin With a Mixed-Product Portfolio

Context

Given

Task

Solution

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