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Mini-Case Review

Mini-Case Review. Ted Mitchell. Mini-Case.

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Mini-Case Review

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  1. Mini-Case Review Ted Mitchell

  2. Mini-Case • The XYZ Toy Company has a selling price of $80 per wagon. The variable cost of making each wagon is $25 per wagon and involves direct materials and labor. In the past month a total of 50,000 wagons were sold and $1,000,000 was spent on advertising, $200,000 was spent on consumer promotions, $400,000 was spent on the sales force, $100,000 was spent on dealer promotion. The company also spent $200,000 on research and development. Monthly rent was $90,000 and Monthly salaries were $160,000.Hint: Prepare a basic operating or income statement for the month before you answer the following questions:

  3. Fill in the Information You have been Given

  4. Calculate The Basics

  5. Calculate The Key Ratios

  6. Now Prepared to Answer Basic Questions

  7. What was the Breakeven Quantity for The XYZ Toy Company? or • What was the Minimum quantity of Wagons that XYZ had to sell last period to cover its costs? • BEQ = Total Fixed Costs/(P-V) • BEQ = $1,700,000 + $450,000 = 2,150,000/$55 • BEQ = 39,091 Units had to be sold just to breakeven

  8. You are Using a Cost Based Approach to setting your Promotion Budgets • What was the Advertising to Sales Ratio last period. • AD/R = $1,000,000/$4,000,000 = 25%

  9. You wish to know how many units are being sold for every marketing dollar being spent on Promotion • Total Marketing Expense = TME = $1,700,000 • Total Quantity Sold = 50,000 • Q/TME = 50,000/$1,700,000 =0.0294 units sold per dollar of promotional effort • Normally quoted in terms of thousands of dollars spent. • For every $1,000 of advertising sells 29.4 units

  10. Calculating Competitive Ratios • Part of Your Marketing Mix is: • Price = $80 • Advertising = $1,000,000 • Consumer Promotion = $200,000 • Sales Force = $400,000 • Dealer Promotions = $100,000 • It Generates 40,000 wagons sold

  11. What is your : • Relative price, Pr • Relative advertising, ADr • Relative consumer promotion, CPr • Relative sales force, SRr • Relative dealer promotion, DPr

  12. How Efficient is Your Marketing System at Converting Relative Effort into Relative Share? • Sr = ADr x CPr x SFr x DPr x (1/Pr) x Efficiency • Efficiency= (Sr x Pr)/(ADr x CPr x SFr x DPr) • Efficiency= (1.25 x 1.03)/(1.11 x 0.91 x 0.89 x 1.11) • Efficiency= 129% • What other part of the marketing mix might explain our 129% efficiency? • Relative Product Quality = Ur

  13. Any Questions?

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