The 3 questions are connected but i don't understand how we got the answer for...

90.2K

Verified Solution

Question

Accounting

The 3 questions are connected but i don't understand how we got the answer for number 3.. can someone please clarify number 3 image

1. Company X produces coffee mugs. They are planning to launch an advertisement on Facebook. Their coffee mugs cost $4 to produce, and are priced at $10. The cost of the Facebook campaign is estimated to be $50,000. They estimate the additional revenue from the campaign to be around $150,000. The margin for this campaign is estimated to be 40%. What is the ROMI of this campaign? Answer: Careful: This is not about the margin (%) for the product. The question already tells you what the margin is for this specific campaign. Only take the campaign margin (%) into account when the information is provided. Cost of Campaign = $50,000 Revenue from Campaign = $120,000 ROMI = [($150,000 x 40%) - $50,000] /50,000 = 10,000/50,000 = 20% 2. A second alternative that Company X is considering is to launch their advertising campaign on TikTok. The cost of the campaign on TikTok is estimated to be $10,000, and the estimated additional revenue coming from the campaign is $52,000. The percentage margin for this campaign is estimated to be 35%. What is the ROMI of this campaign? Answer: Margin (%) = 35% Cost of Campaign = $10,000 Revenue from Campaign = $52,000 ROMI = [($32,000 x 35%) - $10,000] / 10,000 = 8,200/10,000 = 82% 3. A final alternative for Company X is to launch the advertising campaign across both platforms. Calculate what the ROMI is if Company X decides to go this route. Answer: Given that the Margin (%) is different for both campaigns, we will have to make a detailed calculation here. ROMI = [ (Margin ($) for Campaign 1 + Margin ($) for Campaign 2) - (Cost of Campaign 1 + Cost of Campaign 2)]/(Cost of Campaign 1 + Cost of Campaign 2) ROMI = ($10,000 + $8,200) / $60,000 30.3%

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students