advertising budget

Mantis Models – An Excel design exercise

You are a product marketing manager for Mantis Models, a toy company dedicated to realistic insect models.

You have been asked to make a recommendation about how the advertising budget should be spent in the coming year. Last year’s marketing budget of $40,000 was spent equally in each of the four quarters. However, you think that a different quarterly allocation or budget amount would be useful to consider.

Mantis Models toys sell for an average of $40 and cost an average of $25 to manufacture. Sales are seasonal and seasonal adjustments to unit sales are:

Q1: 90% Q2: 110% Q3: 80% Q4: 120%

In addition to manufacturing costs, there are other costs to consider.

· Mantis Models has a sales force that costs $34,000 for the year. The sales forces costs are allocated $4,000 in Q1 and Q2 and $4,500 in Q3 and Q4.

· Overhead costs generally run about 15% of gross revenue.

Quarterly unit sales average 4,000 units when advertising is around $10,000 in the quarter.

Advertising increases sales but has a limit. A marketing consultant estimated the relationship between advertising and sales as follows:

Unit sales = 35 * Seasonal Factor * Sqrt (3,000 + advertising spend)

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