1. At this level of analysis, Let us call the legal-entity enterprise its parent and the child of each of its sales producing divisions.
Let's also call "parent" any child who sells several supplies to the customers of the contracting enterprise, because it is legally constituted. The sibling children are also of direct belonging. For example, a contract enterprise has the highest level of breakdown of its sales in sections A to G. Each of these sections has its own highest level of breakdown of its sales from subsections. Let us designate two of these subsections by the letters AA and GC:
2. Within a legal-entity enterprise, the number of direct affiliations can be very large.
Each reference in the assortment sold is, in fact, the child of a parent, itself a child of a parent, as many times as this path of the tree structure of enterprises in the enterprise has levels.
3. The number of direct affiliations is also that of the copies of the nesting painting located on the same path.
On a copy of this table is the turnover of the child identifiable by a reference of the assortment – an article – and the turnover of the smallest group which is the parent of this child, like this with more than two children as many as necessary:
| Has | B | C | ||
|---|---|---|---|---|
| Child 1 | Child 2 | Parent | ||
| 2 | Turnover | 500 | 400 | 900 |
On a higher-level copy of this same table is the turnover of the smallest grouping, child of the most immediately large grouping which is its parent, again with as many children as necessary.
4. Children and parents have direct costs.
The direct costs of a contractual undertaking are all of its expenses, as established by the general accounts. The direct costs of a subset of a contract undertaking are those that would be waived or otherwise employed if that subset were removed. The purchase prices of products resold as such are, among other things, direct costs. The entire wage of a department or department head is a direct cost of the department or department. Depreciation of fixed assets is part of some direct costs. In economics, there is no organ without direct cost.
5. The sum of the direct costs of children of the same parent is not necessarily equal to the direct costs of the parent.
On a path of belonging, the direct costs are also nested. For example, the full wages of department heads in a department are direct costs of the department, but in these there is also the complete wage of the department head. The same applies to other costs. This is why in the table below, and then in its more complete plots, in cell 3C (row 3, column C) the amount is preceded by the character "{" meaning: this is only the sum of the amounts shown on the left on the same line and not necessarily the amount of the parent's direct costs:
| A | B | C | ||
|---|---|---|---|---|
| Child 1 | Child 2 | Parent | ||
| 2 | Turnover | 500 | 400 | 900 |
| 3 | Direct costs | 300 | 240 | {540 |
The amount of the parent's direct costs is either greater than the sum of the amounts of the children' direct costs, or equal, never less.
The existence of
6. direct costs determines the existence of direct margins.
A direct margin is the difference between a turnover and direct costs:
| A | B | C | ||
|---|---|---|---|---|
| Child 1 | Child 2 | Parent | ||
| 2 | Turnover | 500 | 400 | 900 |
| 3 | Direct costs | 300 | 240 | {540 |
| 4 | Direct margin | 200 | 160 | {360 |
In cell 4C (row 4, column C), the character "{" also means: this is only the sum of the amounts shown on the left on the same line and not necessarily the amount of the parent's direct margin. As a rule, the amount of the parent's direct margin
7. In the complete plot of the nesting table, the amount of the parent's direct costs does not appear.
It is not necessary. Let's show this by taking the example of departments and departments. Going from the general to the specific:
8. The rest of this chapter completes the nesting picture in several stages.
After a further analysis of the direct costs due to the possible existence of internal workshops supplying several centres producing sibling or cousin margins (proposal below), the next stage of construction of the nesting table takes into account the existence of common costs which generally contribute to the determination of the direct margin of the parent:
| A | B | C | ||
|---|---|---|---|---|
| Child 1 | Child 2 | Parent | ||
| 2 | Turnover | 500 | 400 | 900 |
| 3 | Direct costs | 300 | 240 | {540 |
| 4 | Direct margin | 200 | 160 | {360 |
| 8 | Common costs | 340 | ||
| 9 | Direct margin (C4 – C8) | 20 |
9. This modelling of the formation of the final result of a contractual enterprise does not take into account a reality that is nevertheless essential.
What is left aside means that only one of the three ratios of Brown's relationship, above called RPP' is estimable (lending ourselves to errors of judgment, we will recall later why): the profitability P', in this case the ratio between each of the direct margins and the corresponding turnover as in line 7 below.
| A | B | C | ||
|---|---|---|---|---|
| Child 1 | Child 2 | Parent | ||
| 2 | Turnover | 500 | 400 | 900 |
| 3 | Direct costs | 300 | 240 | {540 |
| 4 | Direct margin | 200 | 160 | {360 |
| 7 | Direct profitability | 40% | 40% | {40% |
| 8 | Common costs | 340 | ||
| 9 | Direct margin (C4 – C8) | 20 |
In cell 7C (row 7, column C), the character "{" means: the relative value that follows is the weighted average (360/900) of those on the left of the same row. In this numerical example, the direct profitability P' of the parent is 2.2% (20 in 9C / 900 in 2C).