Answer Sheet 13

SALES REPORT

Name

1. The number of magazines I produced was 250,000

2. Total demand for my magazine was 188,000

3. Did you overproduce, or under produce? And by how much? How much net profit did you make?

We overproduced by 62,000 copies, which is not a bad result. We did well and made a net profit
of £256,400. After dividends and corporation tax, this left us with £128,200 retained profit.

4. Write a report looking at how you could have made more profit with your first issue.
You are writing this report for the chairman of Pepper Publishing and the shareholders of the
company, so make your report as upbeat as possible, and give some convincing reasons why the future
looks bright for your publication.

You must use each of the following terms at least once in your report: sales, sales revenue, profit, next
issue, strengths, weaknesses, shareholders, promotion, free gift, distribution, market research, product
life cycle

You might wish to include the following calculations: Gross Profit Ratio, Net Profit Ratio.
If you have lots of unsold magazines, what are you planning to do with them? Try and make it appear
that you had planned things to turn out the way they have, and if things have gone badly wrong then
blame someone or something else!

Memo to: Mr Gordon Pepper, Chairman, Pepper Publishing

From: The Marketing Director Subject: Performance of the first issue of the new magazine

Some examples of things that could be included in the sales report:

A. I am very pleased with the net profit we have made on our first issue. The net profit was an
impressive £256,400, giving a net profit ratio of 47%. This figure is calculated by dividing my
net profit by sales revenue and multiplying by 100. It shows that for each £1 of sales revenue,
we made 47p net profit. Shareholders can be pleased with the dividend they have been paid.

B. I know that it appears that we have made a big loss on the first issue of the new magazine, but
it is important that certain facts are realised. We expected to make a loss because we used a
penetration price. It is not unusual for new magazines to make big losses in the first issues.
The short term situation may look unpromising, but in the long term, when we have attracted
new readers, then we confidently expect to make a profit. We are at the early stages of our
product life cycle, and as we go into the growth and maturity phases, we expect to increase our
profitability. It is fair to say that we were let down by poor market research. Many of our
decisions were based on this faulty data, and I would recommend that the people responsible
for this be disciplined.

C. It looks as if we overproduced by 150,000, but this was part of our marketing plan. We intend
to give the unsold copies away at concerts over the next few weeks. This has always been a
part of our marketing plan, and will increase sales and profits in the long run.

D. Even though the magazine did very well, there are opportunities for us to improve. New
methods of distribution should be looked at, and more spent on advertising and promotion.
© Holdsworth Associates