WILMORE PAPER COMPANY

Advertising Budget Model

Time Series Analysis by Burcu Arikan, Spring 2008

Introduction Specification Estimation Verification Validation Budget

Budget

Java applet presented below utilizes the Logistic model created earlier to predict future sales and net profit for Wilmore Paper Company. By entering a possible advertising budget in the applet, the applet can generate expected sales amount and a projected financial statement for Wilmore Paper Company based on that advertising budget.

As table 3 shows, in order to break-even the profit estimated for spring 2008 using the desirable advertising expenditures suggested, Wilmore Premium’s sales should equals $35,255,819. While increasing the advertising expenditure does increase the sales, it does not always increase the net profit.

From the budgeting applet below, the advertising budget that yields the highest sales with net profit (5% of sales) is $4,345,000, a 8.8 % increase over the previous quarter. Based on the projected statement from the applet, predicted unit sales for this advertising budget are 4.68 million cases.

TABLE 3: PROJECTED ADVERTISING EXPENDITURE FOR SPRING 2008
  Winter 2008 Spring 2008
Net Sales ($) 34,582,500 35,255,819
Unit Price / case ($) @7.50 case @7.52 case
CGS (Cost of Good solds) 21,441,150 21,612,942
Unit cost /case ($) 4.65 4.61
Gross Margin 13,141,350 13,644,876
Administration / other marketing costs 7,386,643 7,534,375
Advertising 3,991,000 4,345,000
Net Profit $1,763,707 $1,763,707

Link to this java applet code

 

Credits:

Burcu Arikan

burcuarikan@mail.utexas.edu

Department of Advertising

The University of Texas at Austin

2008