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Kuhlman'S Department Store Media Problem Constants: No. of Ads or Web Hits (Changing Cells)

Kuhlman's Department Store is analyzing different media options for advertising to maximize sales and profits. They have a $80,000 budget and are considering internet ads, TV, radio, newspaper, magazine, and direct mail. Internet ads have the largest potential audience of 3 million but the lowest cost per click at $0.01. TV has the second highest potential audience of 400,000 and costs $3,000 per ad but can only run 16 ads total. An analysis of number of ads, expected customers, sales, costs, and profits for each medium is provided to determine the best media option.

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Prakhar Singh
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60 views2 pages

Kuhlman'S Department Store Media Problem Constants: No. of Ads or Web Hits (Changing Cells)

Kuhlman's Department Store is analyzing different media options for advertising to maximize sales and profits. They have a $80,000 budget and are considering internet ads, TV, radio, newspaper, magazine, and direct mail. Internet ads have the largest potential audience of 3 million but the lowest cost per click at $0.01. TV has the second highest potential audience of 400,000 and costs $3,000 per ad but can only run 16 ads total. An analysis of number of ads, expected customers, sales, costs, and profits for each medium is provided to determine the best media option.

Uploaded by

Prakhar Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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KUHLMAN'S DEPARTMENT STORE MEDIA PROBLEM

Constants
Average Sales per new customer per year $ 100.00
Maximum Budget for Advertising $ 80,000.00
Cost of Goods as a percent of Sale 80%
Other Operating Expenses $ 820,000.00
Income Tax Rate 22%

Internet Ads TV
Media Considered
Potential Audience 3,000,000 400,000
Cost per Ad or Web Hit $ 0.01 $ 3,000.00
Maximum Ads or Web Hits Available 3000000 16
% of Customers 0.50% 0.70%

Internet Ads TV

No. of Ads or Web Hits (Changing cells) 10000 13

Calculations

Advertising Expenses $ 100.00 $ 39,000.00


Customers 50.00 36,400.00
Sales $ 5,000.00 $ 3,640,000.00
Cost of Goods $ 4,000.00 $ 2,912,000.00
Sales per advertising dollar 50 93.3333333333333

Income Statement
Sales revenue $ 13,199,000.00
Less: Cost of Goods Sold $ 10,559,200.00
Gross Profit $ 2,639,800.00
Less: Advertising plus other operating expenses $ 900,000.00
Net income before taxes $ 1,739,800.00
Less: Income Tax $ 382,756.00
Net income after taxes $ 1,357,044.00
Radio Newspaper Magazine Direct Mail Ads

250,000 45,000 55,000 250,000


$ 1,000.00 $ 200.00 $ 500.00 $ 0.40
30 52 26 250000
0.80% 1.50% 0.80% 14%

Radio Newspaper Magazine Direct Mail Ads

30 52 1 0

Totals

$ 30,000.00 $ 10,400.00 $ 500.00 $ - ₹ 80,000


60,000.00 35,100.00 440.00 0 131990.00
$ 6,000,000.00 $ 3,510,000.00 $ 44,000.00 $ - $ 13,199,000.00
$ 4,800,000.00 $ 2,808,000.00 $ 35,200.00 $ - $ 10,559,200.00
200 337.5 88 #DIV/0! #DIV/0!

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