Capsim Simulation Grading Guide

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How the Simulation is Scored
How performance in the Capstone Simulation results in a simulation grade The base Capstone Simulation point score is generated as outlined below. You may access your Round and Cumulative score during Team Competition on the CapSim website at Reports →Analysis & Scoring →Analyst Report. This document outlines how the 10-item scoring method will be used. Your grade for the team or Individual Competitions will be simply your total points earned divided by the maximum points earned by a student or team (Individual or Team Competitions) in the same industry (simulation number). Large classes may have two industries organized in them.

Margin points are earned in three areas. 1. Contribution Margin Percentage (Up to 33 1/3 points). Each product with a contribution margin greater than 30% earns points. If all products have contribution margins greater than 30%, you earn 33 1/3 points. 2. Net Margin Percentage (Up to 33 1/3 points). Each product with a net margin greater than 20% earns points. If all products have margins greater than 20%, you earn 33 1/3 points. 3. ROS or Return On Sales (Up to 33 1/3 points). ROS is defined as (Net Profit / Total Sales). ROS looks at the entire company's after tax margins. You earn 33 1/3 points for an ROS of 10% or greater. You earn nothing for a negative ROS. An ROS between 1% and 10% is scaled. For example, an ROS of 5% would earn 16.65 points. To be considered for contribution and net margins, a product must start the year with a plant and begin making sales on January 1. Products that are in R&D at the beginning of the year are ignored. Why do margins matter? And why focus upon Contribution Margin, Net Margin, and Return On Sales? To simplify things, let's consider an example where you have only one product. REVENUE ($000) Sales VARIABLE COSTS Direct Labor Direct Material Inventory Carry Total Variable Costs Contribution margin PERIOD COSTS Depreciation SG&A: R&D Promotion Awsum $30,000 $7,000 $11,500 $500 $19,000 $11,000 $2,000 $500 $1,300 Product Price Labor Material Inventory Carry Unit Margin Units Sold 36.7% Awsum $30.00 $7.00 $11.50 $0.50 $11.00 1,000,000

How the Simulation is Scored Pg. 2 of 19 Sales Admin Total Period Costs Net Margin Other (fees, write-offs) EBIT Interest Taxes Profit Sharing Net Profit $1,100 $300 $5,200 $5,800 $100 $5,700 $2,500 $1,120 $50 $2,030



Example Contribution Margin is defined as Sales less Variable Costs. Variable Costs are the expenses that are tied to the sale of each unit. They are recognized when a unit is sold. Because the number of units you sell varies with demand, they are called Variable Costs. In the example above you sold 1 million units. If you had sold 2 million, your Variable Costs would have been $38 million, but if you sold 500 thousand, they would be only $9.5 million. In short, you do not know your Variable Costs until the sales numbers arrive. Period Costs, on the other hand, are not tied to sales. In the example above, you spent $5.2 million on Period Costs whether you sold anything or not. While you could not say what your Variable Costs were until December 31st, the Period Costs were known on January 1st. Net Margin is defined as Contribution Margin less Period Costs. Put simply, it is what the product contributes towards profits. From the combined Net Margin (normally across all products) you pay the expenses that cannot be allocated to a product. First comes "Other" (expenses like brokerage fees), then Interest, Taxes, and Profit Sharing until you are left with a Net Profit. What is critical here? Have another look at the example. Notice that all the expenses from the PERIOD COSTS label down are either fixed or a percentage of profits. The moment you submit your decisions, everything but Profit Sharing and Taxes is known, and they only occur if you produce a profit. Those known expenses total ($5,200 + $100 + $2,500 = $7,800) or $7.8 million. If your Contribution...
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