Marketing Metrics

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Advise NT Inc. Which of these IS likely to be treated as a unit variable cost?

-Direct material -Direct Labor Cost -Packaging of each unit -Sales force commission

If the manufacturer's selling price is known, you could work towards the consumer's purchase price using.

-Top down markup method -Forward markup method

Which of the following statements about a Balance Sheet is correct?

It reflects a company's financial condition on a specific date.

Which of the following statements is not correct?

Marketers are more concerned with balance sheet.

Cool Fan Company sells 10,000 units to wholesalers each year at $60 per unit. The materials cost $10 per fan and unit labor cost is $15. The total promotion and marketing costs are $100,000. The facility expenses are $80,000 per year and other overheads cost $20,000. What are the total fixed costs of 10,000 fans?

Solution: 100+80+20=$200,000 Answer: $ 200,000

NT Inc sells Product A for $80, with unit variable cost of $16. They also sell Product B for $90 and its UVC is $18. Which product is relatively MORE profitable and why?

Solution: $C for A = 80-16=$64.00. %C=64/80=80% $C for B = 90-18=$72.00. %C=72/90=80%. No difference in %C between the two products. Therefore, no difference in relative profitability. Answer: no difference in relative profitability between the two products.

ABC manufacturing company sells each of its tractors at $20,000 directly to the retailers. ABC pays each of its ten salespersons $60,000 per year. Each salesperson also receives a 5% commission for every tractor sold. The direct labor and material cost $ 8,500. What is ABC's %C for each tractor?

Solution: $C=$10,500. %C=10/500=20000=52.50% Answer: 52.50%

Vegi Juice Inc. sells its product to supermarkets at $12 per case. Each case has 10 bottles of Vegi Juice. The total variable costs per case are $10. What is Vegi Juice Inc.'s %C?

Solution: $C=$2 per case. %C=2/12=16.67% Answer: 16.67%

Sunshine company manufactures 100,000 table fans every year with a unit selling price of $20. The direct material cost for a table fan is $5, and direct labor cost is $4. The factory overhead is $150,000 and the administrative costs are $ 200,000. The company also expends $ 150,000 on advertising every year. What is the total $Contribution of the table fans?

Solution: $C=20-9=$11. Total $C=11*100,000=$1,100,000 Answer: $ 1,100,000

ATT Inc. is developing a new type of cordless phone that would be sold for $ 50 per unit. The unit material cost is $ 10 and unit labor cost is $ 15. The R&D costs incurred so far for the prototype are $ 500,000. The annual manufacturing costs are $ 1 million and the promotion and advertising costs are expected to be $500,000. What is #BEP for the company?

Solution: $C=usp $15 - uvc ($10+$15)= $25. TFC = $1.5 million (exclude R&D, a sunk cost). #BEP=$1.5 million/$25=60,000 Answer: 60,000

Panda Toys Inc. plans to sell one line of its panda toys for $ 20. The material cost per unit is $ 4 and unit labor cost is $ 6. The annual overhead fixed costs are $ 500,000 and the promotion and advertising cost is $100,000. What is the $BEP for the company?

Solution: $C=usp of $20- uvc of ($4+$6)=$10, TFC=500+100=$600,000. #BEP=$600,000/10=60,000, $BEP=60000*$20=$1,200,000 Answer: $1,200,000

Solution: $C=usp of $20- uvc of ($4+$6)=$10, rvs TFC=500+100+50=$650,000. rvs #BEP=$650,000/10=65,000 Answer: 65,000

Solution: $C=usp of $20- uvc of ($4+$6)=$10, rvs TFC=500+100+50=$650,000. rvs #BEP=$650,000/10=65,000, rvs $BEP=65000*$20=$1,300,000 Answer: $1,300,000

Applet sold 50,000 units of smart phones to retailers for $ 80 per unit. The unit material cost is $20 and unit labor cost is $ 30. The annual manufacturing costs are $ 1 million and the promotion and advertising cost $500,000. What is #BEP for the company?

Solution: $C=usp of $80- uvc of ($20+$30)=$30; TFC=($1,000+$500)=$1,500,000, #BEP=1500000/30=50,000 Answer: 50,000

Solution: $C=usp of $80- uvc of ($20+$30)=$30; TFC=($1,000+$500)=$1,500,000, #BEP=1500000/30=50,000. Since sales=50,000 units, it equals #BEP and no profits are earned. Answer: $0

Topdog is a toy company, whose profit/sales percentage is 13% in 2015, 16% in 2016 and 20% in 2017. Assuming simple trend, what is the growth rate percentage of the p/s % of this company from 2016-2017?

Solution: (20.00%-16.00%)/16.00% = 25.00% Answer: 25.00%

Snowflake Inc. sells its ice skates to the wholesalers at $200 a box. Each box has 5 pairs of ice skates. The wholesalers add $10 to each pair of ice skates and sell them to the retailers. The retailers sell each pair at 10%muc. What is the selling price of the retailer per box of ice skates?

Solution: (200+10*5)*(1+10%)=$275. We used F3. Answer: $ 275

NT Inc has registered an impressive 35% sales growth for the just concluded calendar year 2017 and expects to repeat this for 2018. This means..... (S=Sales)

Solution: 2017 Growth Rate % = (just concluded year 2017 - previous year 2016)/previous year 2016. This is given to be 35%. Growth Multiplier for Upcoming 2018 = 1 + Growth Rate 2017 = 1+35% = 1.35. To determine Forecast 2018, you will take S2017 and multiply by GM 2018 i.e. 1.35. Answer: (S2017-S2016)/S2016 = 35%; Growth Multiplier for 2018 = 1.35

NT Inc has registered an impressive 40% sales growth for the just concluded calendar year 2017 and expects to repeat this for 2018. Therefore, (S=Sales)....

Solution: 2017 Growth Rate % = (just concluded year 2017 - previous year 2016)/previous year 2016. This is given to be 40% and assumed to repeat for 2018 Answer: Growth Rate for 2018 = (S2017-S2016)/S2016 = 40%

New Concept notebook Inc. sells its pocket pc (PPC) to retailers at $50 each. The retailers add 10 %muc and sell the PPC to the consumers. NC's direct labor and material cost are $20 for every PPC. What is the $C of each PPC to New Concept?

Solution: 50-20=$30. Other info is superfluous. Answer: $ 30

Advise Denton Snacks, Inc., one more time! A 200% markup on cost is the same as...

Solution: Assume cost=$100 Markup is 200% of this=$200 Therefore usp=100+200=$300 %musp=$mu/sp=200/300=66.67% Answer: 66.67% markup based on selling price

You are invited to give a lecture on breakeven analysis to the Chamber of Commerce. Which of these represents "equivalence" i.e. both sides of the "=" are the same?

Solution: Both sides of Choice A calculate $BEP Both sides of choice C calculate #BEP therefore equivalence applies to both A and C Answer: BEP units * USP = Total Fixed Costs / %C and BEP dollars / USP = Total Fixed Costs / $C

Aha! Inc. had inventory of $500,000 at the beginning of 2017. The company purchased $2,000,000 less purchase discount of 10%. The freight cost was $200,000 and the company had inventory of $300,000 at the end of the year. What is the company's 2017 cost of goods sold?

Solution: COGS=$500+($2000-10%*$2000)+$200-$300=$2,200,000 Answer: $2,200,000

Rainbow Inc. had total sales of $ 480,000 in 2017 and the credits and allowances totaled $ 10,000. The company sold 150,000 units with per unit cost of goods sold of $ 2. The average inventory at cost is $100,000. What is the Inventory Turnover ratio of the company in 2017?

Solution: COGS=150*$2=$300, Avg Inventory=$100. Therefore IT ratio=$300/$100=3 Answer: 3

Snacko! is still evaluating "Spicies", a proposed new snack for 2018. First year breakeven requirements and market share implications would naturally play a key role in their decision to go ahead or scrap the idea. In the analyses involved, Snacko! should include, i.e. consider relevant, which of the following costs?

Solution: Cost of already produced samples have to be written off, if the product is not introduced. A sunk cost. All the other items are relevant costs which will only be incurred after the decision to go ahead is made. Answer: -Budgeted sales force $ for Spicies -Budgeted advertising $ for Spicies -Budgeted production fixed costs $ for Spicies

Star Inc. sells the children's toys to the retailers at the % muc of 15%, what is its % musp?

Solution: Cost=100, mu=15, sp=115. Therefore %musp=15/115=13.04% or use Formula 5. Answer: 13.04%

In 2017, Star! Inc. had current assets of $1,500,000 and the value of its property, plant and equipments were $2,000,000. The company's other assets were valued at $800,000 and its long-term debts totaled $900,000. How much is the company's total assets?

Solution: Exclude the debt, a liability. Therefore, Total assets=$1500+$2000+$800=$4,300,000. Answer: $4,300,000

Sunny Wonderland sells its books to the wholesalers at $8 each, which sells it to the retailers at the 10% muc. The retailer sells the books to the consumers at 15%musp. Which of the following markup chain formula correctly computes the purchase price of the consumers?

Solution: First apply F3 to $8. Then apply F2 to the resulting $8.80. Answer: $ 8*(1 + 10 %muc) / (1- 15 %musp)

It is January 1, 2018. Forecasting skills are likely to be of critical importance to NT Inc (NTI) in preparing this document.

Solution: Forecasting for 2018 means 2017 is irrelevant. January 2018 means NTI would like to know what might happen during 2018. This requires proforma income statement. Answer: NTI's 2017 proforma income statement

Estimating the trend-based 2018 growth rate for ABC Inc, in a growth industry. Sales for 2017 = 50,000 units; 2016 = 45,000; 2015 =40,000 units. Pick the correct expression.

Solution: Growth Rate % for 2017=(2017-2016)/2016=(50,000-45,000)/45,000 =5,000/45,000=1/9 or 11.11%.. This is assumed to repeat for 2018. Answer: (50,000 - 45,000)/45,000

Estimating trend-based 2018 sales for ABC Inc, in a growth industry. Sales for 2017 = 50,000 units; 2016 = 45,000; 2015 =40,000 units. Pick the correct expression.

Solution: Growth rate % for 2017=(2016-2015)/2015=(50,000-45,000)/45,000 =5,000/45,000=1/9 or 11.11%. This is expected to repeat for the upcoming 2018. Therefore, Growth Multiplier for 2018=1+GR% for 2017 =1+11.11%=1.1111. And sales for 2018=2017*GM=50,000*1.1111. Answer: 50,000 * 1.1111

A retailer sells a product for $16 after marking up 33.33% on wholesaler selling price. The wholesaler's markup is 50% based on manufacturer selling price. In this instance, what is the manufacturer selling price (round to 2 decimals where necessary)?

Solution: Here, both retailer and wholesaler markup are %muc. Therefore starting with $16 and applying F4 twice, wholesaler cost =16/1.3333/1.50=$8.00. This is also the manufacturer selling price. Answer: $8.00

A retailer sells a product for $20 after marking up 25% on consumer purchase price. The wholesaler's markup is 50% based on retailer purchase price. In this instance, what is the manufacturer selling price (round to 2 decimals where necessary)?

Solution: Here, both retailer and wholesaler markup are %musp. Therefore, starting with $20 and going backward, applying F1 twice, wholesaler cost=20*(1-25%)*(1-50%)=$7.50. This is also the manufacrturer selling price. Answer: $7.50

A retailer sells widgets for $15.00 after marking up 50% on consumer purchase price. The wholesaler had sold the widgets to the retailer at a markup of 20% on manufacturer selling price. Here, what is the correct markup chain for calculating the manufacturer selling price?

Solution: Here, we are going backward. Retailer sells for $15.00 and enjoys a 50%musp. Wholesaler has a 20%muc. Therefore, we start with $15.00, applying F1 to calculate retailer cost=wholesaler selling price, then applying F4 to calculate wholesaler cost=manufacturer selling price. usp manufacturer=[15*(1-50%)]/(1+20%)=$6.25 Answer: $15*(1-50%) / (1+20%)

Which of these items is likely to be relatively accurately estimated, when preparing the 2018 pro-forma Income statement for NT Inc., in an uncertain economy?

Solution: In an uncertain economy, sales forecast is uncertain. Therefore all things related to that are also iffy. Rent is based on a lease and must be paid according to predetermined schedule, regardless of anything else. Therefore that rent estimate in a Proforma Income Statement is likely to be quite accurate, regardless of the state of the economy. Answer: rent on corporate headquarters

A manufacturer makes a product for $8 and adds a 25% profit on cost. They sell to a wholesaler who sells it for 50% markup based on cost. The retailer marks it up by 33.33% on wholesaler selling price and sells the product to the consumer. What is the total $ channel markup in going from wholesaler cost to retailer selling price, i.e., the $ difference between the two?

Solution: Manufacturer markup is 25%muc. Wholesaler markup is 50%muc. Retailer markup is 33.33% muc. Therefore, the correct markup chain for calculating retail selling price requires applying F3 three times: $8*(1+25%)*(1+50%)*(1+33.33%) = $20. In this chain, the first link deals with the manufacturer who makes for $8 and sells for $10. The difference between wholesaler cost (manufacturer sp) and consumer purchase price is $20-$10=$10. Answer: $10

Consumers buy swimming goggles at $20 per pair. The retailer sells the goggles at a 20 %musp. The wholesaler adds a $ 2 markup in selling to the retailer. Which of the following is the correct markup chain for computing the cost of the wholesaler?

Solution: Note that this involves F1, 20*(1-20%) Answer: ($20 * (1- 20%musp)) - $2

You have prepared a 2018 Proforma Income Statement for Denton Snacks. They ask you to give them an idea of the breakeven $ requirements for the upcoming year. In doing the breakeven analysis, you will typically consider most of the budgeted items under the "cost of goods sold" category of the Proforma Income Statement as....

Solution: Recall from the M04 comparison of Contribution Analysis and Income Statement that Variable Cost and Cost of Goods Sold are close approximations for each other, per unit or total. That is why GM or GP% from the IS is a good estimator of %C. Answer: Variable Costs

A wholesaler purchases widgets for $8 per unit from the manufacturer and sells it to retailers who then sell to consumers. The wholesaler marks up by 20% on the retailer purchase price, while the retailers mark up by 25% on the wholesaler selling price. Here, the retail selling price to the consumer is:

Solution: Starting with $8.00, the wholesaler's cost, apply F2 using the 20%musp of the wholesaler, followed by F3 and the 25%muc of the retailer. usp retailer=[8/(1-20%)]*(1+25%)=$12.50 Answer: $12.50

Solution: TVC=$250,000 and TFC=$200,000. Therefore Total Costs=$450,000 Answer: $ 450,000

Lucky Pizza used flyers to promote its pizzas every week. Last week it mailed 200,000 copies of flyers out to neighbor communities, at a total cost of $4,000. How should the marketing manager of the pizzeria treat the cost of flyers?

Solution: The cost of the flyer is not one of the variable costs. It is not a part of the variable cost of each pizza. Answer: It is fixed cost.

IKEA is planning to celebrate its newest store opening in November in Denton by giving away an IKEA 8oz ceramic coffee mug, that they normally sell, free with each purchase. The promotion would be announced by distributing a glossy color multi-page Sunday insert, costing $2 apiece, in area newspaper for a month prior to the IKEA opening. In assessing the financial viability of proposed promotional campaign, how should IKEA treat the cost of the mug and the newspaper inserts?

Solution: The mug, being offered with every purchase, is clearly a variable cost (one unit=one purchase). The money apent on the flier announcement is lumpsum (regardless of how many purchases really take place). Like advertising, it is a fixed cost. Answer: The mug as a variable cost, the insert as a fixed cost

Snowflake Inc. sells its ice skates to the wholesalers at $200 a box. Each box has 5 pairs of ice skates. The wholesalers add $10 to each pair of ice skates and sell them to the retailers. The retailers sell each pair at 10%muc. Which of the following is the correct markup chain for computing the cost per pair of ice skates to the consumer?

Solution: This incorporates Formula 3, * (1+10%) Answer: (($ 200 / 5) +10) * (1+ 10%)

Panda Inc. had total sales of $24,000 from bamboo bowls in 2017. The company sold 6,000 units of bamboo bowls and the total variable costs were $6,000. What is the $C of each bamboo bowl?

Solution: Total $C=24000-6000=$Hence, $C=18000/6000=$3 Answer: $ 3

Panda Inc. had total sales of $24,000 from bamboo bowls in 2017. The company sold 6,000 units of bamboo bowls and the total variable costs were $6,000. What is total $C of bamboo bowls?

Solution: Total $C=Total Sales - Total Variable Costs = 24000-6000=$18,000 Answer: $ 18,000

The table below provides raw score performance information on three students in a class that carries a total of 1,000 semester points. What is the letter grade of the student B? (Note: 90% or above =A; 80%-89% = B; 70%-79% = C; 60%-69% = D; and 59% and below = F)

Solution: Total Score of Student B = 785 /1000 = 78.50% = C Answer: Grade C

Solution: USP=$60, UVC=$25, $C=$35. %C=35/60=58.33% Answer: 58.33%

You are explaining the similarities between income statement and contribution analysis to a client. Unit Cost of Goods Sold may be treated as approximately equivalent to:

Solution: Unit COGS and UVC are approximately equivalent. See end of Module04 for a comparison of Income Statement and Contribution Analysis. Answer: Unit Variable Cost

As sales manager for Mighty Widgets Manufacturers Inc, you are negotiating a 40% markup based on retailer purchase price to Widget Wholesalers, a promising new prospect. However, Widget Wholesalers are used to % markup based on manufacturer selling price. You want to help them understand what you are offering and decide to express it in terms that the Widget Wholesalers can readily understand and relate to. Pick the correct equivalent of the 40%.

Solution: WW is being offered 40% markup on retailer purchase price i.e. %musp on WW sp. WW is used to %mu on manufacturer selling price i.e. % muc. You need F6 for the conversion from %musp to %muc. %muc=%musp/(1-%musp).=40%/(1-40%). This works out to 66.67%. Answer: 66.67%

Weird! Chip is sold at $4.00 per bag, with the unit variable cost of $ 1.50. Exotic! Chip is sold at $5.00 per bag and its unit variable cost is $ 2.00. Which of the following statements is (are) wrong?

Solution: Weird chip has the higher %C of 62.50% so it is RELATIVELY MORE profitable, not less! Answer: The Weird! Chip is relatively less profitable than Exotic! Chip.

Sunny Wonderland sells its books to the wholesalers at $8 each, which sells it to the retailers at the 10% muc. The retailer sells the books to the consumers at 15%musp. What is the cost to the retailers?

Solution: Wholesaler sells and retailer buys for F3 = 8*(1+10%)=$8.80. Answer: $ 8.80

Advise NT Inc. Which of these IS likely to be treated as a unit variable cost?

Solution: You have many examples this semester showing that all of these are unit variable costs. Answer: -Direct material -Direct labor -Packaging of each unit -Sales force commission

John's Hardware, a small retailer in your part of town, would like to determine selling price of a new glue gun. The store's customary % markup is based on JH's customer's cost. Naturally, JH also know the manufacturer's selling price. Please help the store?

Solution: markup based on JH customer cost = %musp Since they know their cost (purchase price), JH should determine usp using F2. That is, sp = cost /(1-%musp) Answer: Selling Price = Cost / (1 - % markup)

Solution: new $C=usp of $20- uvc of ($4+$5)=$11; new #BEP=TFC of $600,000/$11=54,546, rounded up. new $BEP=54546*$20=$1,090,920 Answer: $1,090,920

A manufacturer sells $8/unit to wholesalers who mark up by 25% on retailer purchase price. Afterwards, the retailers mark up by 33.33% on the wholesaler selling price. In this instance, how will you calculate retailer selling price?

Solution: retailer markup is based on wholesaler sp i.e. %muc. therefore, use F3 to calculate retailer sp = cost * (1+%muc) Answer: sp=cost* (1+%muc)

Solution: rvs $C=new usp of $22- uvc of ($4+$6)=$12, TFC=500+100=$600,000. rvs #BEP=$600,000/12=50,000, rvs $BEP=50000*$22=$1,100,000 Answer: $1,100,000

The following table shows the likelihood of different sales volumes at different prices. At a price of $5.00, a reasonable estimate of expected sales in units is:

Solution: weighted unit sales at $5 price=9,800 Answer: 9,800

A manufacturer sells a product for $5 per unit to a wholesaler who sells it at a markup of 60%, based on manufacturer selling price. The retailer adds another $2 and sells the product to the consumer. What is the retailer's markup?

Solution: wholesaler buys for $5 and marks up 60% on manufacturer selling price i.e. %muc for wholesaler. Using F3, wholesaler selling price=retailer cost=$5*(1+60%) = $8. Retailer adds $2 markup so retailer sp=8+2=$10. %muc retailer=2/8=25%; %musp retailer=2/10=20% Answer: 25%muc, 20%musp

Solution: wholesaler buys for $8 and then marks up 20%musp to sell to the retailer. Then retailer marks up 25%muc. Therefore, the markup chain for calculating retail selling price applies F2, then F3. $8/(1-20%)*(1+25%)=$12.50 Answer: [$8 / (1-20%)] * (1+25%)

A manufacturer sells $8/unit to wholesalers who mark up by 25% on manufacturer selling price. Afterwards, the retailers mark up by 33.33% on the consumer purchase price. Here,

Solution: wholesaler marks up on manufacturer selling price=%muc. retailer marks up on consumer purchase price=%musp. Answer: wholesaler markup is based on cost, retailer markup on selling price

The table shows the likelihood of NT Inc's unit sales at different prices. At a price of $20.00, a reasonable estimate of NT's expected sales in dollars is:

Table: Solution: At $20.00, weighted average for units sold=60%*6000+20%*8000+10%*10000+10%*12000=7,400 units. 7400*$20=$148,000 in sales Answer: $148,000

The table shows the likelihood of NT Inc's unit sales at different prices. At a price of $10.00, a reasonable estimate of NT's expected sales in dollars is:

Table: Solution: At $10.00, weighted average for units sold=40%*6000+30%*8000+20%*10000+10%*12000=8,000 units. This is $80,000 in sales Answer: $80,000

Typically, NT Inc's ________ is accurate, while their _____ is approximate.

Table: Solution: Income Statement is based on past, firm data = more accurate. Proforma Income Statement is based on projections that rely on assumptions = approximate, less accurate. Answer: income statement; pro-forma IS

Based on the Income Statement information below, what is the Net Sales of the company in 2017?

Table: Solution: $800 minus $10 = $790,000 Answer: $ 790,000

Company ABC has four different products. Based on the information in the table, what is the growth percentage for $ sales of product T, 2016-2017?

Table: Solution: $1000 in 2017; $800 in 2016; ($1000-$800)/$800=25.00% Answer: 25%

A friend of yours rates three cars as follows: Predict the car (or cars if there is a tie) that he is LEAST LIKELY to buy based only on this information.

Table: Solution: weighted score for Volkswagen=4.8, the lowest on the 1-10 scale Answer:Volkswagen

The table shows the likelihood of NT Inc's unit sales at different prices. At a price of $20.00, a reasonable estimate of NT's expected sales in units is:

Table: Solution: At $20.00, weighted average for units sold=60%*6000+20%*8000+10%*10000+10%*12000=7,400 units. Answer: 7,400

Company ABC has four different products. Based on the information in the table, what is the growth multiplier for dollar sales of product T, in forecasting 2018 based on trend?

Table: Solution: 1 + ($1000-$800)/$800=1.25 Answer: 1.25

If ABC company's fresh produce division's growth multiplier is equal to 1 this year, the trend suggests:

The fresh produce division will perform the same in next year as in this year.

If ABC company's frozen product division's growth multiplier is less than 1, the trend suggests:

The frozen product division will perform worse in next year than in this year.

Which of the following statements is correct?

c. In general, a company's growth rate percentage is worse than the growth rate % of its best performing division. d. In general, a company's growth rate percentage is better than the growth rate % of its worst performing division.

Which statement(s) on markup formulae is (are) correct?

choices a and b are both correct answers.

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