PRODUCTION & OPERATING EXPENSES
Fixed Costs
Expense figures from Spirit Sportswear's 1994 program were analyzed to determinemarketing costs for contacting schools and for services provided by the program.Fixed costs are those expenses incurred during the initial marketing phaseof the program. They include telemarketer costs (wages and phone charges)and brochure and packet expenses. Each school will be called before and afterbrochure mailings. The ideal time frame for calling is 7 hours a day for6 weeks, 3 weeks for initial contact and 3 weeks for follow-ups. (See Table3).
TABLE 3 - FIXED COSTS FOR NATION-WIDE MARKETING
Telemarketing Information - U.S. Schools | |
| No. of schools to contact | 81,893 |
| No. of calls to contact schools twice | 163,787 |
| Hrs. Allowed for 1st & 2nd contact (3 weeks ea.) | 210 |
| No. Schools to be contacted per hr. | 780 |
| Hrs. Required to contact schools twice | 9,635 |
| No. Schools called per hr., per Telemarketer | 17 |
| No. of Telemarketing hrs per day | 321 |
| No. of Telemarketers needed per day | 54 |
| Telemarketing | Cost/Unit | Total | ||
| Telemarket Wages | $8.50 per hr. | $81,893 | ||
Telephone | No. of calls made | 163,787 | ||
| Long Distance Charges | $1.50 per call | $163,787 | ||
Total Telemarketing Costs | $245,680 | |||
| Brochure Mailers | 1 per School | 81,893 | ||
| Brochure Development | $3,500 | |||
| Printing | $0.30 ea. | $24,568 | ||
| Postage | $0.23 ea. | $18,835 | ||
| Handling & Labels | $0.03 ea. | $2,457 | ||
Total Brochure Costs | $49,360 | |||
| Follow-up Packets | 20% of Schools | 16,379 | ||
| Materials | $0.25 Per Packet | $4,095 | ||
| Postage | $2.25 Per Packet | $36,852 | ||
| Assembly Time (hrs.) | 40 Packets Per Hr. | 409 | ||
| Assembly Labor | $6.50 Per Hr. | $2,659 | ||
| Packet Costs | $43,605 | |||
| Total Fixed Costs | $338,646 | |||
Chart for Table 3
Variable Costs.
Variable marketing costs are associated with expenses incurred for each sale.They include sales commissions, telemarketer bonuses, school price forms,student order forms, and color proofs. Figure 1 provides a comparison ofthese costs. Table 4 provides an analysis of variable costs for sales to0.5, 1, 5, and 10% of the total number of targeted schools.
Table 4 - Variable Marketing Costs
% and Number of schools Sold | 0.5% (409) | 1% (819) | 5% (4,095) | 10% (8,189) | ||
Cost | Unit |
| ||||
Telemarketer Bonus | $20.00 | /Sale | $8,180.00 | $16,380.00 | $81,900.00 | $163,780.00 |
Sales Commission | 10% | /Sale | $81,800.00 | $163,800.00 | $819,000.00 | $1,637,800.00 |
| Forms | ||||||
Price Forms | ||||||
No. of Price Forms | 1/School | 409 | 819 | 4,095 | 8,189 | |
Materials & Labor Cost | $7.50 per | $3,068.00 | $6,143.00 | $30,713.00 | $61,418.00 | |
Student Forms | ||||||
No of Student Forms | 475 /School | 194,275 | 389,025 | 1,945,125 | 3,889,775 | |
Materials Cost | .02¢ ea. | $3,886.00 | $7,781.00 | $38,930.00 | $77,796.00 | |
Copying Time | 650 / hr. | 299 | 599 | 2,993 | 5,984 | |
Copying Labor | $8.00 Per Hr. | $2,391.00 | $4,788.00 | $10,238.00 | $47,874.00 | |
Total Forms Cost | $9,344.00 | $18,711.00 | $79,853.00 | $187,087.00 | ||
| Color Proofs | ||||||
Materials | $2.00 ea. | $818.00 | $1,638.00 | $8,190.00 | $16,378.00 | |
Labor | $10.00 ea. | $4,090.00 | $8,190.00 | $40,950.00 | $81,890.00 | |
Total Color Proof Cost | $4,908.00 | $9,828.00 | $49,140.00 | $98,268.00 | ||
| ||||||
Total Variable Cost | $104,232.00 | $208,719.00 | $1,029,893.00 | $2,086,935.00 | ||
Chart for Table 4
