Question (Adverstising and Marketing) An advertising agency, Round Ltd, incurred
ID: 2331635 • Letter: Q
Question
Question (Adverstising and Marketing)
An advertising agency, Round Ltd, incurred the following expenses during an advertising campaign for Nando’s:
* Primary research costs (outsourced to Mean Research) – $10 000
* Secondary research costs – 5 hours (strategist)
* Flyers:
- Design – 4 hours (artist)
- Printing/production (outsourced to Align Printers) – 8 000 @ $2 each
- Distribution (outsourced to Fast Couriers) – 8 000 @ $0.50 each
* In-store display:
- Design – 7 hours (artist)
- Printing/production (outsourced to Align Printers) – $7 000
- Delivery and set-up (outsourced to Fast Couriers) – $2 000
* In-store promotion:
- Promoters – (outsourced to Talent Ltd) – 2 @ $500 each per day for 5 Saturdays
- Uniforms – 2 @ $500 each
- Promotional items (fruit juice) – 120 boxes at $25 each
- Prizes (provided by Nando’s) – $15 000
* Magazine:
- Design – 10 hours (artist)
- Copy – 5 hours (copywriter)
- Production (outsourced to Align Printers) – $7 500
- 1 DPS colour @ $50 000 in Dough magazine (a weekly publication) for 5 weeks
* Administration costs – $8 000
All prices exclude VAT (14%), the agency is VAT registered and the standard commission is applicable to media. Round off to the nearest Dollar where applicable and show all calculations.
1.1. Calculate the complete budget if the agency uses the fee-commission combination and charges a fee of $75 000.
1.2. Round Ltd places a 20% mark-up on research, 15% on printing/production costs and 10% on other outsourced expenses. Nando’s asked for a 6% kickback from the media. The media gave a 5% cash discount for early payment, but the agency kept the cash discount.
1.2.1 Calculate the budget for Nando’s if Round Ltd uses the negotiated commission system
Which system is preferable to the Nando’s, the fee-commission combination or the negotiated commission system? Prove your answer by calculating the difference between the two remuneration systems.
1.3 Round Ltd places a 20% mark-up on all costs and staff time is charged at a flat rate of $350 per hour. Nando’s asked for a 10% kickback from the media.
Calculate the complete budget for Nando’s if Round Ltd uses the cost-plus system.
Present the most of the results in the following tables:
An advertising agency, Round Ltd, incurred the following expenses during an advertising campaign for Nando's 1.3 Round Ltd places a 20% mark-up on all costs and staff time is charged at a flat rate of $350 per hour. Nando's asked for a 10% kickback from the media *Primary research costs (outsourced to Mean Research)-$10 000 Secondary research costs 5 hours (strategist) Flyers Calculate the complete budget for Nando's if Round Ltd uses the cost-plus system - Design - 4 hours (artist) -Printing/production (outsourced to Align Printers)-8 000 R2 each - Distribution (outsourced to Fast Couriers) 8 000S0.50 each 1.1 In-store cisplay - Design 7 hours (artist) -Printing/production (outsourced to Align Printers) $7 000 - Delivery and set-up (outsourced to Fast Couriers) $2 000 *In-store promotion. -Promoters (outsourced to Taent Ltd) -2$500 each per day for 5 Saturdays - Uniforms-2 S500 each Promotional items (fruit juice)-120 boxes at S25 each -Prizes (provided by Nandes) $15 000 Magazine - Design 10 hours (artist) - Copy - 5 hours (copywriter) - Production (outsourced to Align Printers) S7 500 -1 DPS colour $50 000 in Dcugh magazine (a weekly publication) for 5 weeks Administration costs $8 000 All prices exclude VAT (14%), the agency is VAT registered and the standard commission is applicable to media. Round off to the nearest Dollar where applicable and show all 1.1 Calculate he complete budget if the agency uses the fee-commission combination and charges a fee of $75 000 1.2 Round Ltd places a 20% mark-up on research, 15% on printing/productor costs and 10% on other outsourced expenses. Nandes asked for a 6% kickback from, the media. The media gave a 5% cash discount for early payment, but the agency kept the cash discount. 1.2.1 Calculate the budget for NandaAif Round Ltd uses the negotiated commission system 1.2.2 Which system is preferable to the Nando's, the fee-commission combination or the negotia ed commission system? Prove your answer by calculating the difference between the two remuneration systems.Explanation / Answer
1.1
Particulars Calculations Amount ($) Commission Charged (A) As Per Question 75,000 Primary research cost As per question 10,000 Secondary research cost 5*350 1,750 Flyers: Design 4*350 1,400 Printing/production 8000*2 16,000 Distribution 8000*0.5 4,000 In-Store display: Design 7*350 2,450 Printing/production As per question 7,000 Distribution As per question 2,000 In-Store promotion: Promoters 2*500*5 5,000 Uniforms 2*500 1,000 Promotional Items 120*25 3,000 Prizes No need as provided by Nandoo - Magazine: Design 10*350 3,500 Copy 5*350 1,750 Production As per question 7,500 DPS Colour As per question 50,000 Administrative Costs 8,000 Total Costs (B) 1,24,350 Profit/(loss) [A-B] -$ 49,350