Gross margin fell 4 points over two quarters with prices unchanged
You support the CFO of a mid-sized manufacturer. Gross margin went from 38% to 34% across two quarters. List prices did not change. Volume is up 6%. The procurement head says input costs are flat on a per-kilogram basis. The plant reports no change in yield. The sales mix shifted: the newest product line went from 8% to 21% of volume. Freight cost per order rose 11%. A large customer renegotiated terms last quarter.
Diagnose the erosion. Quantify what you can, rank the candidate causes by how much of the 4 points each could explain, and say what single piece of data would settle it.
100 points, 60% to pass.
- ranking20
- next step20
- decomposition35
- quantification25
Reveal suggested structure
List price unchanged does not mean realised price unchanged — discounts, the renegotiated customer and mix all move realisation. The mix shift is the biggest suspect: a line going from 8% to 21% of volume will dominate the blended margin if its own margin is lower. The discipline being tested is decomposition — separate price, mix, cost and volume effects and size each, rather than naming a list of possibilities.