Marketing Strategy

There are 3 key measures to watch when analyzing the income statement: gross margin percent, expense ratio, and return on sales. Since each of these measures is a percent of revenue, they can be compared over time to identify problems and improvements in margins, or they can be used to check the efficiency of a firms marketing.

Here are the calculations:

Create a spreadsheet showing the income statement for a company that had the following results last period.

Item

Units Sold

Unit Cost

Price

Advertising

Consumer Promotion

Personal Selling

Dealer Promotion

Product Development

Value

100,000

$40

$90

$1,500,000

$1,800,000

5 salespeople @ $80k each

$1,200,000

$700,000

1. What is the gross margin percent for the period?

2. What is the expense ratio?

3. What is the return on sales?

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Student or Team Name:

4. Recalculate each of the measures for unit costs of $35 and $45.

5. Using $40 for unit cost, what is the effect of adding 2 salespeople, if sales increase by 5,000 units?