Return on investment (ROI) is profit divided by investment. In marketing, ROI is determined as incremental sales times gross margin minus marketing investment, all divided by marketing investment. Suppose that a company plans to spend $3 million to place search engine ads and expects $15 million in incremental sales. Its gross margin is estimated to be 45%. a. Develop a spreadsheet to compute the marketing ROI. b. Use the spreadsheet to predict how ROI will change if the incremental sales estimate is wrong (consider a range of values above and below the expected sales).

Return on investment (ROI) is profit divided by investment. In marketing, ROI is determined as incremental sales times gross margin minus marketing investment, all divided by marketing investment. Suppose that a company plans to spend $3 million to place search engine ads and expects $15 million in incremental sales. Its gross margin is estimated to be 45%. a. Develop a spreadsheet to compute the marketing ROI. b. Use the spreadsheet to predict how ROI will change if the incremental sales estimate is wrong (consider a range of values above and below the expected sales).

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 9EA: Classify each of the following performance measures into the balanced scorecard perspective to which...

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