Hi,
I have been benchmarking how my commodity sales are doing compared to a public listed index. I am selling my commodity to two different markets and my performance is measured by how close my sales price is to an index. Beating an index price is almost impossible but there has been some improvement YoY and my ultimate task is to calculate how much money I have made for my company due to improved sales prices.
In 2014, the average index price for my commodity is 354 eur. I have sold the commodity to two different markets A and B. In A market, the sales price is 320 eur and A market presents 23.7% of my total sales. In B market, the sales price is 339 eur and the volume is the rest 76.3%. So my sales price in A market is -34 eur and in B market -15 eur below the index price. In total, in 2014 my sales price is -19 eur (335eur - 354eur) below the index and the total volume is 170,604 units.
In 2015, the average index price for my commodity is 401 eur. I have sold the commodity to the two same markets. In A market, the sales price is 336 eur and A market presents 9.9% of my total sales. In B market, the sales price is 388 eur and the volume is the rest 90.1%. So my sales price in A market is -46 eur and in B market -12 eur below the index price. In total, in 2015 my total sales price is -15 eur below the index and the total volume is 105,204 units.
We can see that in 2014 I was -19eur below the index and in 2015 -15eur below the index though the volume decreased. My manager asked me to calculate how much more money I made for the company due to smaller cap to the index. Even though there is less volume in 2015, I have to only calculate what is the impact of smaller cap (-15 eur less -19 eur = 4 eur improvement).
So I calculated 4 eur x 105,204 (2015 volume) and could say that the improved margin is 420,814eur. However, if I calculate what is the improvment in market A, I would calculate (-34eur - -46eur) -12eur*9.9%*105,204=-124,982 eur. Using the same logic, the improvement in market B would be (-12 - -15) = 3 eur and then I would multiply with volume (105,204x90.1%) = 284,365eur.
When I summarize improvement in market A and Market B, it should equal with the total number: -124,982eur + 284,365eur = 420,814eur. As you can see, it doesn't and there is something I cannot understand. Can you please explain me, how I should calculate the improved performance relatively to an index.
Thank you,
Jani
I have been benchmarking how my commodity sales are doing compared to a public listed index. I am selling my commodity to two different markets and my performance is measured by how close my sales price is to an index. Beating an index price is almost impossible but there has been some improvement YoY and my ultimate task is to calculate how much money I have made for my company due to improved sales prices.
In 2014, the average index price for my commodity is 354 eur. I have sold the commodity to two different markets A and B. In A market, the sales price is 320 eur and A market presents 23.7% of my total sales. In B market, the sales price is 339 eur and the volume is the rest 76.3%. So my sales price in A market is -34 eur and in B market -15 eur below the index price. In total, in 2014 my sales price is -19 eur (335eur - 354eur) below the index and the total volume is 170,604 units.
In 2015, the average index price for my commodity is 401 eur. I have sold the commodity to the two same markets. In A market, the sales price is 336 eur and A market presents 9.9% of my total sales. In B market, the sales price is 388 eur and the volume is the rest 90.1%. So my sales price in A market is -46 eur and in B market -12 eur below the index price. In total, in 2015 my total sales price is -15 eur below the index and the total volume is 105,204 units.
We can see that in 2014 I was -19eur below the index and in 2015 -15eur below the index though the volume decreased. My manager asked me to calculate how much more money I made for the company due to smaller cap to the index. Even though there is less volume in 2015, I have to only calculate what is the impact of smaller cap (-15 eur less -19 eur = 4 eur improvement).
So I calculated 4 eur x 105,204 (2015 volume) and could say that the improved margin is 420,814eur. However, if I calculate what is the improvment in market A, I would calculate (-34eur - -46eur) -12eur*9.9%*105,204=-124,982 eur. Using the same logic, the improvement in market B would be (-12 - -15) = 3 eur and then I would multiply with volume (105,204x90.1%) = 284,365eur.
When I summarize improvement in market A and Market B, it should equal with the total number: -124,982eur + 284,365eur = 420,814eur. As you can see, it doesn't and there is something I cannot understand. Can you please explain me, how I should calculate the improved performance relatively to an index.
Thank you,
Jani