In the first review, you analyze as suggested by the CSO, the operating performance of the two Business Unit A and B for the year 2019 using 3 key margin levels: gross margin, EBITDA margin and contribution margin (sales less variable cost). For the computation of the contribution margin, you should exclude depreciation from your analysis and you know that fixed costs are general cost and a part of R&D. For 2019 you estimate that in BU A, 1392 K€ of R&D costs are fixed and for BU B 600K€. All other operating costs are variable.
Then analyze the respective weight of the two BU in the turnover and in each of the three margins as a % of the total (for example, Business A represents 25056 / (25056+23620) = 51.5% of total sales versus 48.5% for B).
Finally at this stage would you recommend to follow the proposal of the CSO?
