Explore BrainMass
Share

Explore BrainMass

    Calculating Incremental Revenue and Incremental COGS

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Bob, the new Chief Marketing Officer at the XYZ company has proposed an expansion of the companies marketing efforts. He claims that an investment of $1,000,000 in marketing research this year, and following this with an increase in marketing expenditures of $250,000 a year will increase sales by 10% each year over the sales forecasted without the marketing program. The sales forecasts and costs are shown below. The market research study is not depreciable but should be considered as an investment in year 0.

    Year 0 1 2 3 4
    Revenue without Marketing program $18,000,000 $20,000,000 $22,000,000 $24,000,000 $26,000,000
    Proposal increase in revenue 10%
    Revenue with Marketing program $18,000,000 $22,000,000 $24,200,000 $26,400,000 $28,600,000
    COGS percentage of revenues 48%
    S.G.A. (no change)
    Market Research $1,000,000
    Annual Marketing Increase $250,000
    MARR 16%
    Tax 14%
    Working Capital (all kinds) 45% of revenue

    © BrainMass Inc. brainmass.com October 10, 2019, 6:17 am ad1c9bdddf
    https://brainmass.com/economics/production/calculating-incremental-revenue-incremental-cogs-537469

    Attachments

    Solution Preview

    Solution

    Q1:
    Determine the how the present worth would be affected by prices of $47, $49, $51 and $53 with a quantity sold of 55,000.
    $47 $49 $51
    ($61,716) ($421,235) ($181,556) $58,123
    Use the Data Table function in Excel (MSExcel 2010). ...

    Solution Summary

    The expert calculates the incremental revenues and incremental COGS.

    $2.19