both accrual and cash systems used in accounting are inadequate for a weekly report on marketing...
TRANSCRIPT
Both Accrual and Cash Systems Used in Accounting are
Inadequate for a Weekly Report on Marketing Performance
Ted Mitchell
Accounting Systems
• 1) Monthly Accrual System• Audience is the shareholder• Seek to match costs and revenues over time• Smooth out the profit picture• 2) Weekly Cash Flow System• Audience is the Cost accountant• Records all cash flows
You as Marketing managers will find
• The classic monthly accrual-based Accounting Reports– Balance sheet
(important for retained earnings)– Income statement
• To be inadequate for making profitable marketing decisions
• You will be wanting a weekly marketing performance report
Fixed Cost Minimum Cost in Month 1
Maximum Cost in Month 1
Rent for Month
$2,000 $2,000 $2,000
Utilities per month
$500 $500 $500
Coffee Maker
$3,000 $6,000
Furniture $2,000 $4,000
Total $7,500 $12,500
You will spend between $7,500 and $12,500 in cash into the business in the first month
Ignore the sunk costs that are accrued each month
Marketing Manager in Biz Cafe
• Need a Weekly Performance Statement• That identifies the cost of the marketing
decisions made in the week and the market’s immediate response to those weekly decisions
You will want to build a weekly marketing manager’s report
• On a spreadsheet• constructed for the reporting of a weekly
marketing performance It will include:• Price, Demand, Revenues, Cost of Goods Sold,
Gross Profit, Direct Marketing Expenses for the Week and Marketing Profit!
• Marketing is the amount of profit being contributed to the owners’ net income by the firm’s weekly marketing efforts
Marketing Performance Report for 100 hours of Operation in Week #
Selling Price Tag, P $3.50
Quantity of Cups sold (Demand), Q 2,000
Revenue, R = P x Q $7,000
Cost per cup, V $0.30
Cost of Goods SoldCOGS = V x Q
$600
Gross profit, G = R - COGS $6,400
Cost of Servers (21 x $10 x 10 hrs) $2,100
Cost of Advertising $1,400
Cost of Radio Spots $1,400 $2,800
Marketing Profit, Z = G – (Cost of Servers + Adv +Spots)
$1,500
Three very useable weekly reports
• Provide some information for the Weekly Marketing Report• 1) The Dashboard Report• Cost of Goods Sold, COGS• Gross Profit, G• 2) The Weekly Sales Receipts Report• Demand (Quantity sold), Q• Price Tag(s), P• Revenue, R• 3) The Decision Summary• Servers and Cost of• Advertising, Radio Spots and Cost of
Marketing Performance Report for 100 hours of Operation in Week #
Selling Price Tag, P $3.50
Quantity of Cups sold (Demand), Q 2,000
Revenue, R = P x Q $7,000
Cost per cup, V $0.30
Cost of Goods SoldCOGS = V x Q
$600
Gross profit, G = R - COGS $6,400
Cost of Servers (21 x $10 x 10 hrs) $2,100
Cost of Advertising $1,400
Cost of Radio Spots $1,400 $2,800
Marketing Profit, Z = G – (Cost of Servers + Adv +Spots)
$1,500
You have to calculate your own Marketing Profit, Z
Any Questions on?
• 1) Why are the cash system and the accrual systems inadequate for the marketing manager in Biz-Café
• 2) Why is in the Weekly Report on Marketing Performance?