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    Chapter No. 3 Marketing Cost and Profitability Analysis

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    The document discusses marketing cost and profitability analysis. It classifies marketing costs into categories like selling, advertising, warehousing, etc. It explains how to allocate costs by function and analyze profitability by territories, customers, products and salespeople. An example is provided to analyze the marketing costs of a company by territory.

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    Chapter No. 3 Marketing Cost and Profitability Analysis

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    Babar
    92 views12 pages
    The document discusses marketing cost and profitability analysis. It classifies marketing costs into categories like selling, advertising, warehousing, etc. It explains how to allocate costs by function and analyze profitability by territories, customers, products and salespeople. An example is provided to analyze the marketing costs of a company by territory.

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    profit planning and cost analysis

    Original Title

    Lecture No. 13

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    The document discusses marketing cost and profitability analysis. It classifies marketing costs into categories like selling, advertising, warehousing, etc. It explains how to allocate costs by function and analyze profitability by territories, customers, products and salespeople. An example is provided to analyze the marketing costs of a company by territory.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    92 views12 pages

    Chapter No. 3 Marketing Cost and Profitability Analysis

    Uploaded by

    Babar
    The document discusses marketing cost and profitability analysis. It classifies marketing costs into categories like selling, advertising, warehousing, etc. It explains how to allocate costs by function and analyze profitability by territories, customers, products and salespeople. An example is provided to analyze the marketing costs of a company by territory.

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    You are on page 1of 12

    Chapter No.

    3
    Marketing Cost and
    Profitability Analysis

    Lecture No. 13
    Marketing

    Marketing is matching products of a company with satisfaction


    of customers at a reasonable profit for company.

    Marketing Cost and Profitability Analysis

    The study and evaluation of the relative profitability or costs of


    different marketing operations in terms of customers,
    salespersons, Products, territories, or marketing activities. Cost
    accounting is typically used for this purpose.
    A. Classification of Marketing Cost

    Classification of marketing cost according to functions or


    activities:
    a. Selling
    b. Advertising
    c. Warehousing
    d. Packing & Shipping
    e. Credit & Collection
    f. General Accounting (for Marketing)
    B. Marketing Cost Allocation

    Some of the basis for allocating marketing expenses are:

    Function Cost Allocation Basis

    Commission Sale of product by salesperson

    Advertising Quantity of product units sold

    Warehousing Size or weight

    Packing & Shipping Number of shipping units

    Credit & Collection Number of customer orders

    General Accounting Transactions


    C. Marketing Profitability Analysis

    Under this, cost is analyzed and profitability of each territory,


    customer, product and sales person is determined.

    a. Analysis by Territories

    Expenses assigned directly to a territory include:


    (i) salespersons’ salaries, (ii) commissions, (iii) travelling
    expenses, (iv) transportation cost, (v) packing & shipping cost,
    and (vi) advertising
    Expenses that must be prorated to the territory include:
    (i) General management, (ii) general sales manager, (iii) credit
    & Collection, and (iv) general accounting.
    b. Analysis by Customers

    Customers are grouped according to certain characteristics to


    make the analysis meaningful. The grouping may be by:
    (i) amount of average order (10, 20, 30, etc.), (ii) customer
    volume (High or low), and (iv) kind of customer.

    c. Analysis by Product

    Products sold can be grouped according to product line or


    brand.
    d. Analysis by Salesperson

    Selling function includes cost such as salaries, commission,


    travel and other expenses connected with the work of sales
    representatives.
    For control of cost and analysis of profitability of sales made by
    salespersons, the standard costs and performance standards
    should be established.
    Students please consult Exercise Number 1 of Chapter Number
    23 ‘Marketing Cost and Profitability Analysis’ of your book.
    Solution

    The King Air Freshener Company


    Marketing Cost Analysis
    For the Year 19…
    Territory
    Waco Dallas Total
    Sales Salaries $30,400 $45,600 $76,000
    Salespersons’ expenses 6,000 10,200 16,200
    Advertising 4,000 20,000 24,000
    Delivery expenses 9,450 15,750 25,200
    Credit investigation expenses 2,800 4,000 6,800
    Collection expenses 2,850 8,550 11,400
    Total $55,500 $104,100 $159,600

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