I have a difficulty to figure it out the calculation. Please help

GC-1030 Finance for Marketing Decisions Homework Exercise #1 Situation Your company Sports Edge Fitness Wear is launching new product (a shirt) for the spring sales cycle. For this campaign the company has spent a total of $150,000 in advertising: $25,000 was used for brochures and print ads and $125,000 to a search engine company to generate on-line email and website responses. Responses received to date include: 500 emails, 1,000 from sending out brochures and 750 clicks to the Company's website You and your marketing colleagues have assessed the market for this new shirt and decided to price it for sale to retailers at $40. You estimate that each retailer will order 20 shirts/month. The Sports Edge operations team has been developing the supply chain to produce the shirts and notes that shirts will be ready for sale and shipment 5 months from now. A shirt will cost $10 to make and deliver to retailers. In addition to advertising spend (noted above) fixed costs associated with this new shirt product are $6,000 per month until sales begin. There are no fixed costs associated with the shirt after sales begin (that is, in the 6 th month and thereafter). The sales team has followed up with the responses from retailers, which can be used to forecast volume and revenues: Salesperson Carlos Chao-Lin Sarita Total Sports Edge Fitness Wear - New Shirt Sales Pipeline Interest Pre-Commitment Agreed Cold Warm Initial Follow-up Leads Leads Prospects Mtg. Mtg. 56 30 19 5 8 79 51 33 16 4 62 43 25 11 7 197 124 77 32 19 Total Potential Retailers 118 183 148 449 From histories of previous campaigns, you should assume that: 10% of cold leads will lead to sales in 5 months, 25% of warm leads will lead to sales in 4 months, 20% of qualified prospects will lead to sales in 3 months, 35% of initial meeting retailers will lead to sales in 2 months, and 50% of follow-up meeting retailers will lead to sales in 1 month*. ____________________________________ * The Excel workbook Tactical Sales Forecast is a useful tool. GC1030 - IHW 1 - Sports Edge Fitness Revenue Forecasting 2015.10.08.docx Page 1 GC-1030 Finance for Marketing Decisions Homework Exercise #1 Assignment Write a memo to your Division President in which you: Forecast the number of shirts to be produced for shipment and invoicing 5 months from now (i.e. the first month that the shirts are available for sale and shipment) for input into the organization's Sales and Operations Plan (S&OP), Forecast revenues 5 months from now and show your results in tabular form. (Attach this table as an attachment to the memo you are writing. Be sure to reference the attachment in the text of your memo.) Develop a breakeven analysis o How many shirts must be sold in total to breakeven? What will the resulting cumulative revenue be? o Assuming that the monthly sales volume and revenue remain constant after the first month of sales, calculate the time (number of months) it will take to breakeven, Perform sensitivity analyses by calculating breakeven volumes, revenues, and months to breakeven for:` o 5% higher shirt price o 20% higher average order volume o 20% higher shirt cost o 10% lower fixed cost Calculate and benchmark marketing metrics o Briefly assess market prices/rates for marketing materials and on-line advertising; compare market rates with the spend for the shirt campaign o Suggest other marketing metrics and discuss how these metrics can be used to (i) forecast better and (ii) assess sales and marketing effectiveness. Be sure to document your data and assumptions, and mention the actions you are taking to correct any problems you might see in spending for marketing and also meet or exceed your forecast. ____________________________________ * The Excel workbook Tactical Sales Forecast is a useful tool GC1030 - IHW 1 - Sports Edge Fitness Revenue Forecasting 2015.10.08.docx Page 2