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Application of Marketing MathReference Case:--Basic Quantitative Analysis for marketingLow – Tech Marketing Math (Harvard Business School)
Presented by:--Aritra Banerjee (23/008)Saakshi Nayak (23/028)
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Cost - Revenue Analysis
For the purpose marketing analysis of any product or services we need to have to determine :-- Price
( cost + margin)
Volume Distribution ( selling and distribution cost) Competitive forces
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Cost- Types
1. Fixed cost : Remains constant irrespective of volume of production or salesa. Total fixed cost (TFC) TFC= K (K: constant)b. Average fixed cost ( TFC/ number of units produced or sold)
k
Pic source : http://www2.owen.vanderbilt.edu
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Cost- Types
Variable cost: a cost that varies with the level of output.VC= f(q)
Amosweb.com
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Total Cost
Total Cost = Total Fixed Cost + Total Variable Cost = k + f(q)
Economics .about.com
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Revenue and Profit
Sales (revenue)
xxxxxxx
Less: Variable cost
(xxxxx)
Contribution
xxxxxx
Less: Fixed Cost
(xxxxx)
Profit/loss
xxxxxx Economics .about.com
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Break Even Point
The break-even point (BEP) is the point at which total cost and total revenue are equal. There is no profit no loss An indicative tool which helps in making marketing strategies.
Mathematically represented as:--
Break Even Volume = Total fixed cost
contribution per unit
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ISO Profit Curve
2500
2000
1500
1000
500
2 4 68 10
Variable cost
ISO curve: same level of profit at every point of the
curve.
volu
me
price
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Selling And Distribution Margin
Manufacturer’s margin($3.50) = Manufacturer's selling price to distributers($7.5) -
manufacturing
cost($40)
Wholesalers margin($1.20) = Wholesalers selling price to retailers($8.70) - price paid to
manufacturer($7.50)
Retailer’s margin = Retailer's selling price to consumers($10.00) - price paid to
wholesales($8.70)
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