What is "Cost per unit of effort" and "Margin per unit of output"?

Created by Steve Hoover, Modified on Thu, Oct 17 at 1:43 PM by Steve Hoover


In the resource allocation module, interpretation of the output depends on the units in which your input (effort) and output (sales, gross margin, etc.) are measured.  In some situations, the cost per unit effort is $1 (for example if we measure advertising in terms of dollars spent). On the other hand, if the effort is measured in terms of salespeople, then the cost per unit of effort is the salary for the salesperson.  The margin in the expected profit for each unit of output.  If output is measured in dollar sales, and if you make 25 cents gross margin on the sale, then the margin per unit of output is 25%.   If sales are measured in units of products sold, and if each unit sells for $5 with a profit of $1, then the margin per unit of output is 20%. 

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