A large provider of automobile insurance with $17 billion in revenue last year spent $1.8 billion on advertising and plans to continue spending the same percentage of sales on advertising next year. The average advertising-to-sales ratio for the auto insurance industry is 0.1 percent of sales. If the company projects $25 billion in sales next year, using the percentage-of-sales method of advertising budgeting, how much will the company budget for advertising if basing it on projected sales? How much would the company budget if it based its advertising spending on the industry advertising-to-sales ratio? Is the company consistent with the average industry spending on advertising? The advertising-to-sales ratio for the last year is (Round to four decimal places.)

A large provider of automobile insurance with $17 billion in revenue last year spent $1.8 billion on advertising and plans to continue spending the same percentage of sales on advertising next year. The average advertising-to-sales ratio for the auto insurance industry is 0.1 percent of sales. If the company projects $25 billion in sales next year, using the percentage-of-sales method of advertising budgeting, how much will the company budget for advertising if basing it on projected sales? How much would the company budget if it based its advertising spending on the industry advertising-to-sales ratio? Is the company consistent with the average industry spending on advertising? The advertising-to-sales ratio for the last year is (Round to four decimal places.)

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 9EA: Brahma Industries sells vinyl replacement windows to home improvement retailers nationwide. The...

See similar textbooks

Similar questions

Assume the marketing department has presented a plan to increase advertising expenses by $340 million. It expects this plan to result in an increase in both net sales and cost of goods sold of 25%. (Hint: Increase both sales revenue and sales returns and allowances by 25%.) Redo parts (a) and (b) and discuss whether this plan has merit. (Assume a tax rate of 34%, and round all amounts to whole dollars.)Prepare a multiple-step income statement. (Round answers to 0 decimal places, e.g. 15,222.)
The sportswear department had net sales of $550,000 last year, with markdowns of $35,000. This year plan sales are $575,000. If the buyer is planning the same percent of markdowns this year as last year what is the markdown dollars for this year?
Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $196,945 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $94,000, with associated expenses of $34,500. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience's tax rate is 30 percent. (Hint: The $196,945 advertising cost is an expense.) Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the payback period for the advertising program. 2. Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate calculations and final answer to the nearest whole dollar.) 1. Payback period 2. Net present value years
Kindly, answer the following: a. The sales manager feels that an P110,000 increase in monthly advertising budget, combined with an intensified effort by the sales staff will result in a P840,000 increase in monthly sales. Considering these changes, what will be the company’s increase or decrease in profit? b. The president is convinced that a 10% reduction in the selling price, combined with an increase of P35,000 in the monthly advertising budget, will cause units sales to double. Considering these changes, how much is the company’s expected profit? c. A new package for the product is being considered to induce sales. This package costs P0.60 per unit. Considering the new package cost, how many units would have to be sold each month to earn a profit ofP90,000?
In the previous year, Company E sold 10,000 units for $328,000. In the coming year they are anticipating selling 20% more units than last year. Assuming they do not change their selling price, what is their budgeted revenue for the upcoming year?
Cyber Security Systems had sales of 4,600 units at $65 per unit last year. The marketing manager projects a 30 percent increase in unit volume sales this year with a 40 percent price increase. Returned merchandise will represent 5 percent of total sales. What is your net dollar sales projection for this year?
Heathshoe Limited had profits before tax of 873,334 in the current year, which represented 25% of sales for the year. Next year, they are budgeting that sales are expected to increase by 20% and costs will increase by 15%. What is the budgeted profit?
A company is making plans for next year, using cost-volume-profit analysis as its planning tool. Next year's sales data about its product are as follows Selling price P60 Variable manufacturing costs per unit 22.50 Variable selling and administrative costs 4.5 Fixed operating costs (60% is manufacturing costs) P159,500 Income tax rate 30% How much should sales be next year if the company wants to earn profit after tax of P23,100, the same amount that it earned last year?
Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $182,050 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $85,000, with associated expenses of $30,000. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience's tax rate is 30 percent. (Hint: The $182,050 advertising cost is an expense.) Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the payback period for the advertising program. 2. Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate calculations and final answer to the nearest whole dollar.) 1. 2. > Answer is complete but not entirely correct. Payback period Net present value 3✔ years $ 49,209 X
3. The relationship between the advertising budget (x, in $ millions) and sales (y, in $ billions) of a retailer can be expressed by the following regression model. The advertising budget of last year is $2 million, and the advertising budget for this year is expected to decrease by 25%, what would be the forecast for this year’s sales? And what is the percent change in sales compared to last year?y = 1.6 + 0.7x Select one: a. $2.65 billion; decreased about 13.2%. b. $3.35 billion; increased about 10.14%. c. $2.65 billion; decreased about 11.7%. d. $2.75 billion; decreased about 8.3%. e. $3.35 billion; increased about 11.7%
Haresh
Hammond Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows. Required: 1. What is Hammonds variable cost ratio? Its contribution margin ratio? 2. Suppose Hammonds actual revenues are 200,000 greater than budgeted. By how much will before-tax profits increase? Give the answer without preparing a new income statement. 3. How much sales revenue must Hammond earn in order to break even? What is the expected margin of safety? (Round your answers to the nearest dollar.) 4. How much sales revenue must Hammond generate to earn a before-tax profit of 130,000? An after-tax profit of 90,000? (Round your answers to the nearest dollar.) Prepare a contribution margin income statement to verify the accuracy of your last answer.