Financial Aspects of Marketing Management Graduate Marketing Certificate Program Chip Besio Cox School of Business

Relevant Accounting Concepts

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Variable Costs

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Costs of Goods Sold

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Indirect Variable Costs

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Fixed Costs

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Programmed Costs

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Committed Costs

Relevant Accounting Concepts

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Relevant Costs

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Expected Future Marketing Related

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Vary According to Alternative Chosen

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Sunk Costs

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Past Expenditures Irrelevant to Future Planning

• •

Research & Development Previous Advertising Expenditures

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Sunk Cost Fallacy

Relevant Accounting Concepts

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Gross Margin

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Total Revenue - Total C.O.G.S.

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Unit Selling Price - Unit C.O.G.S.

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Expressed as Dollars or Percentage

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Can Be Impacted by a Change in:

• • • •

Volume C.O.G.S.

Selling Price Mix of Products Sold

Relevant Accounting Concepts

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Trade Margin

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Each Level of Distribution Chain

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“Markup or Mark-On”

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Usually Determined on Selling Price

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Net Profit Margin

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Sales Revenue less:

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C.O.G.S.

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Other Variable Costs Fixed Costs

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Equal Net Profit Margin (Before Taxes)

Contribution Analysis

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Break Even Analysis

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Total Revenue = Total Variable Costs + Total Fixed Costs

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Break Even = Total $ Fixed Costs / Unit Selling Price - Unit Variable Costs

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Unit Contribution= Unit Selling Price Unit Variable Cost/Unit Selling Price

Contribution Analysis

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Sensitivity Analysis

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Unit Contribution Has Many Applications

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Vary Each Element to Look at Alternative Strategies

Contribution Analysis

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Sensitivity Analysis

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Evaluate Each Product in Mix

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Managers Should Evaluate Each Element:

• • • • • • •

Unit Price Sales Volume Unit Variable Costs Total Variable Costs Unit Contribution Total Contribution Net Profit

Contribution Analysis

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Cannibalization Assessment

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New Products May Attract Existing Product’s Customers

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Determine the Financial Impact of New Product on Existing Products

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Compare Current Product Gross Margin against Gross Margin of New Product Mix

Other Financial Concepts

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Pro-Forma Income Statements

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Anticipated Revenues vs. Related Costs

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Based on Managers Strategic Scenarios

Other Financial Concepts

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Market Share

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Market Share is your company’s piece of the pie

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Market Share = Your Company’s Sales/Total Sales In Your Category