80.2K

Verified Solution

Link Copied!

Aizan opened a small business a year ago manufacturing customized golf walking bags. The bags, which are used to hold golf clubs, are manufactured with durable high-end fabrics and choice of custom designs, targeted at the golfer who appreciates both style and function. Azan invested $100,000 of his savings to start his business with a goal of earning a 15% return-on-investment. Unfortunately, after the first year of business, Azan fell short of his goal, achieving only a 13% return-on-investment. To attract additional investors to and expand his business in the future Azan knows he must be able to provide a 15% return-on-investment. Over the past year, Aizan conducted a great deal of marketing research to collect data on consumer price sensitivity, demand, and response to marketing activities for his target market. Using his understanding of return-on-investment pricing and research findings, he constructed a simple spreadsheet to project operating statements for the upcoming year. Aizan is evaluating four potential marketing mixes for next year, each with its own strength and weakness. Although manufacturing costs are expected to increase by 20% next year, Azan negotiated a price break from his supplier that reduces this increase to 10% if his volume reaches 5500 units. Aizan discovered that he could charge the highest price for his product if he used magazine advertising to reposition his product as a luxury good, but that consumer demand increased more with direct mail, free 30-day trial offers, or social media campaigns. However, each of those strategies was only effective at a price point lower than $100 The goal of this activity is to understand how target return-on-investment pricing can be calculated using an operating statement. Keep in mind that Return on investment Net profit after taxes/Investment. Use the formulas above and the spreadsheet below to help answer the questions that follow. The spreadsheet fields highlighted in yellow can be changed in order to determine possible outcomes. You can find the initial values in the corresponding blue cells in columns G to J. Start by entering the initial values into columns B to E. Then review the questions below and adjust the values in columns B to E to determine the correct answers Aizan opened a small business a year ago manufacturing customized golf walking bags. The bags, which are used to hold golf clubs, are manufactured with durable high-end fabrics and choice of custom designs, targeted at the golfer who appreciates both style and function. Azan invested $100,000 of his savings to start his business with a goal of earning a 15% return-on-investment. Unfortunately, after the first year of business, Azan fell short of his goal, achieving only a 13% return-on-investment. To attract additional investors to and expand his business in the future Azan knows he must be able to provide a 15% return-on-investment. Over the past year, Aizan conducted a great deal of marketing research to collect data on consumer price sensitivity, demand, and response to marketing activities for his target market. Using his understanding of return-on-investment pricing and research findings, he constructed a simple spreadsheet to project operating statements for the upcoming year. Aizan is evaluating four potential marketing mixes for next year, each with its own strength and weakness. Although manufacturing costs are expected to increase by 20% next year, Azan negotiated a price break from his supplier that reduces this increase to 10% if his volume reaches 5500 units. Aizan discovered that he could charge the highest price for his product if he used magazine advertising to reposition his product as a luxury good, but that consumer demand increased more with direct mail, free 30-day trial offers, or social media campaigns. However, each of those strategies was only effective at a price point lower than $100 The goal of this activity is to understand how target return-on-investment pricing can be calculated using an operating statement. Keep in mind that Return on investment Net profit after taxes/Investment. Use the formulas above and the spreadsheet below to help answer the questions that follow. The spreadsheet fields highlighted in yellow can be changed in order to determine possible outcomes. You can find the initial values in the corresponding blue cells in columns G to J. Start by entering the initial values into columns B to E. Then review the questions below and adjust the values in columns B to E to determine the correct answers

Answer & Explanation Solved by verified expert

See Answer