Management may want various types of information for decision making. Many aspects of an organization will require depicting in a management report. The following are some outline that might be highlighted in many management reports.
(a) How much contribution has been made from total sales? Contribution is the difference between sales revenue and variable costs of that sale. It is prudently applied in decision making as fixed costs are not relevant to many business decisions under full capacity utilization of a plant.
(b) How much gross margin has been made from total sales? Gross margin is the ratio of gross profit to sales revenue and is applied to view the relationship between production/purchasing costs and sales revenues and to analyze the pure trading activities of an organization. It is calculated as [(sales – cost of sales)/sales]x100.
(c) Gross revenue is income from sales. It is a sign of the level of demand for the organization’s product or services in a given period.
(d) General and administrative expenses require to be watchfully controlled in order to maintain net profit margins at an acceptable level. They may be targeted as an area for cost reduction if the organization is trying to get better its profitability.
(e) Value-added is sales less cost of bought-in materials and services, and represents the assets or value created though business operations. It is affected only by costs incurred internally, such as labor, and is therefore useful as a target. Sometimes value added is calculated as (profit + interest +conversion costs).
(f) Marketing expense may be compared to revenue on a period by period basis to view whether the expenditure has produced the expected increase in sales and in which areas.