Question

You are the marketing manager of a 100 year old organization called The Welshmachine who manufactures a wide variety of sporting goods ranging from precision manufactured rugby balls to sports clothes and accessories. Currently, you are developing the marketing plan for one particular rugby ball, which exploits latest developments in manufacturing technology. This plan focuses on a new market for the organization - namely New Zealand. There is intense competition in the rugby ball market for distribution space in sports retailers. As a consequence you are planning to devote significant promotional spend to advertising and sales promotion to generate awareness of the new rugby ball among retailers and the rugby sporting community. You accept that the introduction costs will be high, but you are also aware that potential financial returns are also high Each new rugby ball costs $42 to manufacture, and will retail at S160 in New Zealand. The retailer has a 30% margin. The plan is to ship the balls to 4 large sports wholesalers (total freight/documentation costs are estimated at $6 per ball) who then distribute to large sports retailers in the main urban areas of Auckland, Wellington, Christchurch and Dunedin. The sports wholesalers earns $40 per ball sold to sports retailers. The Welshmachine has decided to allocate $20000 for trade magazine advertising directed to the sports wholesalers. There are also 2 sports goods trade shows which the organization plans to attend so that it can use point-of-sale material to generate awareness of the new rugby ball among sports retails. Each trade show costs $3000. In addition to this, you are planning to instigate a direct mail campaign targeted at the 1500 sports retailers throughout New Zealand. Each direct mail piece will cost $1.50 which includes the cost of mailing. End-user advertising has also been budgeted at $30000. A part- time agent has also been appointed with a salary of $28,000 and this agent earns $36 for each box of balls (6 balls in a box) sold to the sports wholesalers.

Determine the total fixed cost

Answer 1

The total fixed cost for The Welshmachine's marketing plan for a new rugby ball is $86,250, calculated by summing up the trade magazine advertising, trade show attendance, direct mail campaign, end-user advertising, and the salary of the part-time agent.

Step-by-step explanation:

The student is asking to determine the total fixed cost for The Welshmachine's marketing plan for a new rugby ball in New Zealand. Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related costs, including salaries or rents being paid per month. In this case, fixed costs include trade magazine advertising, trade show attendance, the direct mail campaign, end-user advertising, and the salary of the part-time agent, as these costs do not vary with the volume of rugby balls produced or sold.

Calculating each fixed cost, we have:

• Trade magazine advertising: $20,000
• Trade shows (2 shows × $3,000 each): $6,000
• Direct mail campaign (1,500 retailers × $1.50 each): $2,250
• End-user advertising: $30,000
• Part-time agent salary: $28,000

Summing these up, the total fixed cost is:

• $20,000 + $6,000 + $2,250 + $30,000 + $28,000 = $86,250