Timothy Donaghy has developed a unique formula for growing hair. His proprietary lotion, used regularly for 45 days, will grow hair in bald spots (with varying degrees of success). Timothy calls his lotion Hair-Again and is selling it via the telephone and Internet. His major form of marketing is through 15-minute infomercials and Internet advertising. Timothy sells each 16-ounce bottle of Hair-Again for $15 and pays a commission of 3 percent of sales to telephone operators who field the 1-800 phone calls from potential customers. Fixed marketing expenses for each quarter of the coming year include: Internet banner ads $7,500 Telephone operator time 5,000 Travel 3,000 In addition, early next year Timothy intends to film and show infomercials on television. He expects the cost to be $10,000 in quarters 1 and 2, and that the cost will rise to $24,000 in each of quarters 3 and 4. Timothy expects the following unit sales of Hair-Again: Quarter 1 5,000 Quarter 2 15,000 Quarter 3 40,000 Quarter 4 35,000
Timothy Donaghy has developed a unique formula for growing hair. His proprietary lotion, used regularly for 45 days, will grow hair in bald spots (with varying degrees of success). Timothy calls his lotion Hair-Again and is selling it via the telephone and Internet. His major form of marketing is through 15-minute infomercials and Internet advertising. Timothy sells each 16-ounce bottle of Hair-Again for $15 and pays a commission of 3 percent of sales to telephone operators who field the 1-800 phone calls from potential customers. Fixed marketing expenses for each quarter of the coming year include: Internet banner ads $7,500 Telephone operator time 5,000 Travel 3,000 In addition, early next year Timothy intends to film and show infomercials on television. He expects the cost to be $10,000 in quarters 1 and 2, and that the cost will rise to $24,000 in each of quarters 3 and 4. Timothy expects the following unit sales of Hair-Again: Quarter 1 5,000 Quarter 2 15,000 Quarter 3 40,000 Quarter 4 35,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
5.1
Transcribed Image Text:Marketing Expense Budget
Timothy Donaghy has developed a unique formula for growing hair. His proprietary lotion, used regularly for 45 days, will grow hair in bald
spots (with varying degrees of success). Timothy calls his lotion Hair-Again and is selling it via the telephone and Internet. His major form of
marketing is through 15-minute infomercials and Internet advertising. Timothy sells each 16-ounce bottle of Hair-Again for $15 and pays a
commission of 3 percent of sales to telephone operators who field the 1-800 phone calls from potential customers. Fixed marketing expenses
for each quarter of the coming year include:
Internet banner ads
$7,500
Telephone operator time
5,000
Travel
3,000
In addition, early next year Timothy intends to film and show infomercials on television. He expects the cost to be $10,000 in quarters 1 and
2, and that the cost will rise to $24,000 in each of quarters 3 and 4. Timothy expects the following unit sales of Hair-Again:
Quarter 1
5,000
Quarter 2
15,000
Quarter 3
40,000
Quarter 4
35,000
Transcribed Image Text:Required:
1. Construct a marketing expense budget for Hair-Again for the coming year. Show total amounts by quarter and in total for the year. If
required, round your answers to two decimal places.
Hair-Again
Marketing Expense Budget
For the Year Ended December 31
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Total
Total variable expense
Fixed marketing expense:
Total fixed expense
Total marketing expense
%24
24
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