Question

n​ 2014, Company A reported profits of about

​$42

billion on sales of

​$151

billion. For that same​ period, Company B posted a profit of about

​$23

billion on sales of

​$117

billion. So Company A is a better​ marketer, right? Sales and profits provide information to compare the profitability of these two​ competitors, but between these numbers is information regarding the efficiency of marketing efforts in creating those sales and profits. Using the following information from the​ companies' income statements​ (all numbers are in​ thousands), calculate profit​ margin, net marketing​ contribution, marketing return on sales​ (or marketing​ ROS), and marketing return on investment​ (or marketing​ ROI) for each company.

                                                                                                                                                                                                                                                                                                                                         

    

	Company A	Company B
Sales	​$150,621,000	​$117,056,000
Gross Profit	​$69,227,000	​$59,617,000
Marketing Expenses	​ $8,310,450	​$15,432,900
Net Income​ (Profit)	​$42,015,000	​$23,213,000

Fill in the table below. ​(Round the NMC to the nearest whole number and all other values to two decimal​ places.)

What is the NMC of both companies?

​Company A: $

Company B: $

​

Answer 1

The Net Marketing Contribution (NMC) is calculated by using the following formula

Net Marketing Contribution (NMC) = Sales – Cost of goods sold – Marketing Expenses

Here, the Gross Profit is given (Gross Profit = Sales – Cost of goods sold), therefore, the Net Marketing Contribution (NMC) = Gross Profit – Marketing Expenses

Net Marketing Contribution (NMC) – COMPANY A

Net Marketing Contribution (NMC) = Gross Profit – Marketing Expenses

= $6,92,27,000 - 83,10,450

= $6,09,16,550

Net Marketing Contribution (NMC) – COMPANY B

Net Marketing Contribution (NMC) = Gross Profit – Marketing Expenses

= $5,96,17,000 - $ 1,54,32,900

= $4,41,84,100