chap015 Sales Management

Salespeople in the field Less exact
Cost-volume relationship
Volume is a function of cost V=f( C ) Difficult to measure
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— — 28,200 — — 15,500 18,600 7,500 430,000 13,200 513,000
Allocation of Activity Costs to Sales Regions, Col Ski Co. 2002 (Fig. 15-4) 15Activity Allocation basis Total activity cost No. of allocation units Cost per allocation unit
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Income and Expense Statement, by Sales Region, Col Ski Co. 2002 ($000) (Fig. 15-5) 15Net sales Less cost of goods sold Gross margin Less operating expenses: Personal selling Advertising Warehousing/shipping Order processing Administration Total operating expenses Net profit (loss)
Allocation of Costs
units — cost $1,070,000 units — Midwestern cost $747,000 units — Western cost $2,030,000 Eastern
3,800 orders 39,500 lines one $190,000 $79,000 $171,000 2,500 orders 28,000 lines one $125,000 $56,000 $171,000 3,300 orders 52,500 lines one $165,00Байду номын сангаас $105,000 $171,000
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
A Comparison of Marketing Cost Analysis and Production Cost Accounting (Fig. 15-1) 15Comparison Factors
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
Income and Expense Statement by Sales Region, Col Ski Co 2002, in $000, using contribution-margin approach (Fig. 15-7) contribution15Net sales Less cost of goods sold Gross margin Less direct operating expenses: Personal selling Advertising Warehousing/shipping Order processing Total direct expenses Contribution margin Less indirect operating expenses: Personal selling Advertising Warehousing/shipping Order processing Administration Total indirect expenses Net profit Total Eastern M idwestern $27,000 $9,000 $4,500 18,900 6,300 3,150 8,100 2,700 1,350 3,082 732 160 130 4,104 $ 3,996 765 488 320 110 513 $2,196 $1,800 845 254 64 43 1,206 $1,494 595 127 42 30 794 $ 556 Western $13,500 9,450 4,050 1,642 351 54 57 2,104 $1,946
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— — 40,900 — — 66,000 100,500 46,300 168,000 58,300 480,000
— — 43,500 — — 14,000 16,200 14,000 126,000 26,300 240,000
Income and Expense Statement, 2002, Colorado Ski Company ($000) (Fig. 15-2) 15Net sales Less cost of goods sold Gross margin Less operating expenses: Sales salaries and commissions $3,240 Sales force travel 372 Supplies and telephone 178 Media space 870 Advertising salaries 218 Property taxes 120 Heat and light 168 Insurance 84 Administrative salaries 930 Other expenses 120 Total operating expenses Net profit
Personal Selling
9,600 orders 120,000 lines 3 regions $2 per line $171,000/reg.
$20,000/pg. $50 per order
21 pages $420,000 11 pages $220,000 29 pages $580,000
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
Methods Used to Allocate Indirect Costs (Fig. 15-6) 15Method Divide cost equally among territories or whatever market segments are being analyzed. Allocate costs in proportion to sales volume obtained from each territory (or product or customer group). Evaluation Easy to do, but inaccurate and usually unfair to some market segments. Underlying philosophy: apply cost burden where it can best be borne. That is, charge a high-volume market segment with a large share of the indirect cost. This method is simple and easy to do, but may be very inaccurate. Tells very little about a segment’ Again, easy to do but can be inaccurate and misleading. Falsely assumes a close relationship between direct and indirect expenses.
Activity Cost Categories Personal Warehousing Order SellingAdvertising and ShippingProcessingAdministration
Ledger expenses Totals Sales salaries/commis $3,240,000 $3,240,000 — Sales force travel 372,000 372,000 — Supplies & telephone 178,000 43,200 22,200 Media space 870,000 — 870,000 Advertising salaries 218,000 — 218,000 Property taxes 120,000 10,000 14,500 Heat and light 168,000 15,300 17,400 Insurance 84,000 12,000 4,200 Administ. salaries 930,000 144,000 62,000 Other expenses 120,000 10,500 11,700 Totals $6,300,000 3,847,000 1,220,000
Bases for computing costs
Marketing Cost Analysis
Marketing unit: territory, customer group, order size, as well as product More complex