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!