My approach in forecasting PIP’s estimated sugar costs is fairly simple:
- Determine the average bags used to generate per P1 gross sales
- Determine the estimated number of bags and total cost
The rationale is to lean on the relationship of gross sales and bags of sugar purchased to generate per P1 revenue.
Determine the bags used to generate per P1 revenue
I assumed residual cost is 90% attributable to sugar to give room for other costs.
Calculating for the number of bags consumed per year is as follows:
* change in financial period reporting
Determine the ratio of bags used per P1 gross sales generated:
Average bag used to generate P1 revenue is .00020 bag.
Determine the estimated number of bags and total cost
Determining the financial impact of P900 sugar price
Assuming all else constant, we will have the following calculation:
The financial impact of P900 sugar price to PIP’s financial statements is a decline of percentage of Cost of Goods Sold to Gross Sales to [22.732 million / 11.781 million] 52% from the current 62% which could increase PIP’s earnings to P3 billion.
Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell. Read more in the ABOUT page.