Question

You are consulting with a company who is interested in purchasing a marketing plan from you. Currently, their main product has a sales price of $30 per unit, variable cost of $12 per unit and total fixed costs associated with this produce of $55,000. Last year they sold 18,000 units. In your plan, you recommend that they lower the sales price to $28 and your plan costs $9,500 annually. You estimate that their sales should increase to 21,000 units if they accept your recommendations. Calculate the ROI if the company decides to purchase your marketing plan. answers:

33.33%

41.54%

66.66%

26.32%

Answer 1

Particulars	If Plan not accepted	If Plan accepted
Sales Price	$                30	$                28
Variable Cost	$                12	$                12
Contribution	$                18	$                16
Units sold	18000	21000
Total Contribution	$      324,000	$      336,000
Less: Fixed Cost	$         55,000	$         64,500
Total Profit	$      269,000	$      271,500

Increase in profit by accepting the plan = 271,500 - 269,000 = $2500

Cost of Plan = $9500

Return on investment = $2500/$9500*100 = 26.32%

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