Answers to four problem questions with detailed explanations

¶ … business pertains to what that business does and what it is, as a whole. The kind of philosophy it has, the products it makes or services it provides, and the all-encompassing theme o the entire business make up its definition (Sullivan & Sheffrin, 2003; Swarming, 2006). The mission and goals, however, are only a part of that business definition. The goals are specific, concrete, and attainable, and they keep the business moving forward (Christensen, 1997). They can be made public, so the community has an idea of what the business wants to accomplish, or they can be kept private. Either way, they have to be realistic, and they must be worked toward steadily and revised at various intervals until they are achieved. Then, new goals can be set that build on the original goals the business had. The mission of the business is its statement to the public about the overall direction it is taking and what it looks for and desires in the future. That mission is generally presented to the public, so it can be a "selling point" for the business and what that business stands for (Dev & Schultz, 2005). Marketers must understand these terms so they can keep them separate and utilize them effectively.

Variable costs are those that can change from month to month (or even day-to-day). Fixed costs are those that are static, and that do not change. Things like a mortgage payment with a fixed interest rate is a fixed cost, whereas something like an electric bill that can differ from month to month would be a variable cost. In addition to these two kinds of costs, there are also relevant and sunk costs. Sunk costs are past costs that have been incurred already and that are not able to be recovered (Joshi, 2005; Guiltinan, 1996). Relevant costs are specific to the decisions that are made by management. They are only relevant (or even acquired) during certain situations, and are not seen in other types of situations. It is important that all of these costs are understood, because marketing managers can use them to better showcase the financial health of the business.

A pro forma income statement is used to project future (anticipated) income, sales, and expenses (Christensen, 1997). There are six categories on the statement. These are Sales, Cost of Goods Sold, Gross Profit (or Margin), Marketing Expenses, General (Administrative) Expenses, and Net Profit (Before Income Taxes) (Joshi, 2005; Sullivan & Sheffrin, 2003). A marketing manager needs this kind of income statement because he or she is responsible for his or her marketing actions and how they affect the company financially. With the pro forma income statement, the marketing manager can project future sales and profits, and can also indicate what the future expenses will be in order to achieve the desired goals (Joshi, 2005). That will provide the company with strong insight as to whether they want to move forward with a particular project or whether it will prove to be too costly of an undertaking for the profit they are likely to receive.