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 2,000 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:
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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 | 2,000 |
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 $25,000 in each of quarters 3 and 4. Timothy expects the following unit sales of Hair-Again:
| Quarter 1 | 5,000 |
| Quarter 2 | 15,000 |
| Quarter 3 | 40,000 |
| Quarter 4 | 35,000 |
Required:
Question Content Area
1. Construct a marketing expense budget for Hair-Again for the coming year. Show total amounts by quarter and in total for the year. If required, round your answers to two decimal places.
| Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Total | |
|---|---|---|---|---|---|
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- Select - | - Select - | - Select - | - Select - | - Select - |
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$- Select - | $- Select - | $- Select - | $- Select - | $- Select - |
| Total variable expense | $fill in the blank 751013082025067_13 | $fill in the blank 751013082025067_14 | $fill in the blank 751013082025067_15 | $fill in the blank 751013082025067_16 | $fill in the blank 751013082025067_17 |
| Fixed marketing expense: | |||||
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$- Select - | $- Select - | $- Select - | $- Select - | $- Select - |
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- Select - | - Select - | - Select - | - Select - | - Select - |
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- Select - | - Select - | - Select - | - Select - | - Select - |
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- Select - | - Select - | - Select - | - Select - | - Select - |
| Total fixed expense | $fill in the blank 751013082025067_42 | $fill in the blank 751013082025067_43 | $fill in the blank 751013082025067_44 | $fill in the blank 751013082025067_45 | $fill in the blank 751013082025067_46 |
| Total marketing expense | $fill in the blank 751013082025067_47 | $fill in the blank 751013082025067_48 | $fill in the blank 751013082025067_49 | $fill in the blank 751013082025067_50 | $fill in the blank 751013082025067_51 |
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".
| Variable marketing expense | $fill in the blank b61dbcff200d037_1 |
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| Fixed marketing expense | $fill in the blank b61dbcff200d037_3 |
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| Total marketing expense | $fill in the blank b61dbcff200d037_5 |
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