Accounting for Decision Making and Control 8th Edition by Jerold Zimmerman

Exercise 15

Marketing Plan
Robin Jensen, manager of market planning for Viral Products of the IDP Pharmaceutical Co., is responsible for advertising a class of products. She has designed a three-year marketing plan to increase the market share of her product class. Her plan involves a major increase in magazine advertising. She has met with an advertising agency that has designed a three-year ad campaign involving 12 separate ads that build on a common theme. Each ad will run in three consecutive monthly medical magazines and then be followed by the next ad in the sequence. Up to five medical journals will carry the ad campaign. Direct mail campaigns and direct sales promotional material will be designed to follow the theme of the ad currently appearing. The accompanying table summarizes the cost of the campaign:
The firm's normal policy is to budget each year as a separate entity without carrying forward unspent monies. Jensen is requesting that, instead of just approving the budget for next year (Year 1 above), the firm approve and budget the entire three-year project. This would allow her to move forward with her campaign and give her the freedom to apply any unspent funds in one year to the next year or to use them in another part of the campaign. She argues that the ad campaign is an integrated project stretching over three years and should be either approved or rejected in its entirety.
Required:
Critically evaluate Jensen's request and make a recommendation as to whether a three-year budget should be approved per her proposal. (Assume that the advertising campaign is expected to be a profitable project.)