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Marketing Performance Evaluation

13) Foamstar Ltd, a company selling a washing machine, has estimated the market

capacity as 50, 000 units a year, divided evenly over five sales area-East, South, North

and Centre. The Managing Director has set a sales objective of between 50% and 80% of

this potential. The sales force is divided into five equal areas and the objective is

expected to be achieved by using salesmen in the following manner.

Number of salesmen used/area Market share expected %

5 506 587 658 719 7610 7811 80

All the products are manufactured at one location at ex-factory cost of 8,400 each and are

sold at a standardized price of Rs.10,000 each. The transportation and installation costs

varies in relation to the distance from the factory as follows:

Sales Area Variable transportation/Installation cost/unit

East 1,000

West 900

South 800

North 750

Centre 700

35 Salesmen will be employed at an average cost of Rs.1,00,000 per anum each. The

Marketing Director indicated that even with additional salesmen increase beyond 6500per area would be difficult unless additional expenditure are incurred in advertising and

sales incentives as below:

Sales Per Area Additional Expenditure

6501-7000 Rs.10,000 for every 100 units sold beyond 65007001-7500 Rs.50,000 plus 15,000 for every 100 units sold

beyond 7000

7501-8000 Rs.1,25,000 plus Rs.20,000 for every 100 units Sold

beyond 7500 units

Given that there must be at least five salesmen in each areas, you are required to do the

following:a) Calculate the highest total contribution possible using 35 salesmen.b) Advise whether increasing the sales force would improve the total contribution.

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14) Ambika Condiments bring about 2 productsSuchi & Ruchi which are popular inmarket. The management has the option to alter the sales-mix of the 2 products from outof the following combinationsOption Suchi(Units) Ruchi(Units)I 800 600

II 1,600 -III - 1,300IV 1,100 500The per unit production cost/sales data are :

Suchi(Rs.) Ruchi(Rs.)Direct Material 25 30Direct Labour 20 24Selling Price 75 90Variable O/H 100% of Direct Labour, Common Fixed Overhead for both ProductsRs. 10000. You are required to

1) Prepare a marginal cost statement for the two products2) Evaluate the options and identify the most profitable sales mix.

15) Dream Works Ltd manufactures a standard product, the marginal cost(per unit) ofwhich are as follows:Direct Material Rs.160Direct Wages Rs.120Variable Overheads Rs.20

Total Rs.300Its Annual Budget includes the following: Output 40,000 units.Fixed Overheads:Production Rs.80,00,000Administration Rs.48,00,000

Marketing Rs.40,00,000Total Rs.1,68,00,000

Contribution Rs.2,00,00,000Recently, the top management of the organization has started thinking in terms ofrevising its budget and some alternatives in the form of proposals(stated below) werediscussed in the last board meetingProposal 1The organization expects a profit of Rs.48,00,000 and wants to know the selling price tobe quoted for the purpose. It is estimated that a) an increase in advertising expenditureof Rs.9,44,000 would result in 10% increase in sales and b) Fixed production overheadsand marketing overheads would increase by Rs.2,00,000 & Rs.1,36,000 respectively.

Proposal 2The organization expects that, with an additional advertising expenditure sales wouldgo up by 20% and a profit margin of 15% would be obtained. Under the circumstances,fixed overheads and marketing are expected to increase by Rs.3,20,000 & Rs.2,00,000respectively. The organization wants to know the additional expenditure onadvertisement required with a view to achieving the result. You are required to draw upforecast statements for each of these alternatives and determine the selling price perunit.