Question

The operating income of Carbon Footwear is $10 million. Its net marketing contribution is derived from sales of $80 million and the marketing and sales expenses amount to $15 million. The general and administrative expenses and other operating expenses amount to $20 million.

Answer each question. Include several sentences of explanation for each one.

1. What is the total amount of Carbon Footwear's net marketing contribution?

2. Calculate the percent gross profit generated by Carbon Footwear.

3. If the total sales revenue generated was $100 million, the marketing ROS would be equal to the ________. Why?

Hint for Question 3: Question #3 is asking for “the _____________”, a number is not the answer. Consider the possible answers below.

marketing and sales expenses

marketing ROI

operating income

net marketing contribution

general and administrative expenses

Answer 1

1. The total amount of Carbon Footwear's net marketing contribution:
Contribution = Operating income + the marketing and sales expenses
= 10+ 20 = 30million

2. Calculate the percent gross profit generated by Carbon Footwear.
Gross profit margin = 10+15+20 / 80 = 45/ 80 = 25.25%

3. If the total sales revenue generated was $100 million,
the marketing ROS would be = 47.5%
Here, if sales - cost = contribution
= 80-50 = 30 as per part 1
for 80 sales = 50 variable cost
then for 100million sales , variable cost = 100*50/80 = 62.5million
ROS = 62.5 -15million = 47.5 / sales = 47.5 / 100 = 47.5%