Analysis Of Chester's Capsim Management Simulation

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As previously discussed, contribution margins identify how much is available from the sale of each unit that can be used to pay for variable cost and fixed costs and still provide a profit for the company (Merritt, 2014). While conducting research and completing the Capsim Management Simulation experiment, quantitative data has been assessed to aid in determining if a high contribution rate leads to profitability. Using the Capstone Courier Report data for years 2014- 2022 (simulation rounds 1-8); team Chester had the following contribution margins which are presented in the graph and table provided below. Figure 2: Contribution Margin results

Table 1: Team Chester’s Contribution Margin calculation Sales Variable Cost Contribution …show more content…

This paper attempted to explain Chester’s Capsim results in relation to high contribution rates leading to profitability in a simulated business. Chester’s results illustrated that high contribution rate leads to profitability. Research suggests that practices designed to increase the contribution margin will likely result in improved profitability, liquidity and debt structure. Chester agrees with results in this study because Chester managed to strategically make decisions that allowed the company to finish the competition with zero debt and profit. Maintaining major investments in product segments, pricing modification and increased marketing raised the variable cost each year but it assisted in increasing the contribution margin and profits because customers were buying the updated products for each segment. For instance, in round 0 Chester started the simulation with a contribution margin of 28.3% which was calculated by selling $101,073,437 in merchandise and spending $72,513 in variable costs but after making decisions in regards to product segments, pricing, and modification, etc. the variable cost increased to $88,183 which led to increasing sales by $25,830 to earn $126,903 in round 1. This also resulted in a 2.2% increase of the contribution margin to 30.5% from round

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