Marketing Expense Budget
Timothy Donaghy has developed a unique formula for growing hair. His proprietary lotion, used regularly for 45 days, will grow hair in bald spots (with varying degrees of success). Timothy calls his lotion Hair-Again and is selling it via the telephone and Internet. His major form of marketing is through 15-minute infomercials and Internet advertising. Timothy sells each 16-ounce bottle of Hair-Again for $15 and pays a commission of 3 percent of sales to telephone operators who field the 1-800 phone calls from potential customers. Fixed marketing expenses for each quarter of the coming year include:
Internet banner ads | $7,600 |
Telephone operator time | 5,000 |
Travel | 3,000 |
In addition, early next year Timothy intends to film and show infomercials on television. He expects the cost to be $10,000 in quarters 1 and 2, and that the cost will rise to $25,000 in each of quarters 3 and 4. Timothy expects the following unit sales of Hair-Again:
Quarter 1 | 5,000 |
Quarter 2 | 15,000 |
Quarter 3 | 40,000 |
Quarter 4 | 35,000 |
Required:
1. Construct a marketing expense budget for Hair-Again for the coming year. Show total amounts by quarter and in total for the year. If required, round your answers to two decimal places.
2. What if the cost of internet ads rises to $16,000 in Quarters 2 through 4? How would that affect variable marketing expense? Fixed marketing expense? Total marketing expense? If no effect, enter "0" and select "no impact".
1 | |||||
Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Total | |
Sales units | 5000 | 15000 | 40000 | 35000 | |
Sales commission per unit | 15 | 15 | 15 | 15 | |
Total Variable Expenses | 75000 | 225000 | 600000 | 525000 | |
Variable expenses | |||||
Sales comission @3% | 2250 | 6750 | 18000 | 15750 | 42750 |
Fixed Marketing Expenses | |||||
Internet Banner ads | 7600 | 7600 | 7600 | 7600 | 30400 |
Telephone Operator time | 4000 | 4000 | 4000 | 4000 | 16000 |
Travel | 3000 | 3000 | 3000 | 3000 | 12000 |
Informercials cost | 10000 | 1000 | 1000 | 1000 | 70000 |
Total | 26850 | 31325 | 57600 | 55350 | 171150 |
2) | |||||
Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Total | |
Sales units | 5000 | 15000 | 40000 | 35000 | |
Sales commission per unit | 15 | 15 | 15 | 15 | |
Total Variable Expenses | 75000 | 225000 | 600000 | 525000 | |
Variable expenses | |||||
Sales comission @3% | 2250 | 6750 | 18000 | 15750 | 42750 |
Fixed Marketing Expenses | |||||
Internet Banner ads | 7600 | 15000 | 15000 | 15000 | 52600 |
Telephone Operator time | 4000 | 4000 | 4000 | 4000 | 16000 |
Travel | 3000 | 3000 | 3000 | 3000 | 12000 |
Informercials cost | 10000 | 1000 | 1000 | 1000 | 70000 |
Total | 26850 | 38750 | 65000 | 62750 | 193350 |
Marketing Expense Budget Timothy Donaghy has developed a unique formula for growing hair. His proprietary lotion,...
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