What is ROAS if it costs $80 in advertising to sell three units of a $100 product?

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Prepare for the WGU MKTG 6040 D381 E-Commerce and Marketing Analytics Exam. Use flashcards and multiple choice questions with hints and explanations. Ensure your success on this crucial exam!

Multiple Choice

What is ROAS if it costs $80 in advertising to sell three units of a $100 product?

Explanation:
ROAS is the revenue earned per dollar spent on advertising. To find it, calculate total revenue from the sales and then divide by the ad spend. Total revenue = 3 units × $100 each = $300. ROAS = $300 ÷ $80 = 3.75. So, for every $1 spent on advertising, you generate $3.75 in revenue. The other numbers come from misapplying the math: 0.375 would imply only $30 in revenue, 37.5 would imply $3,000 in revenue, and 1.25 would reflect revenue per unit divided by spend rather than total revenue for all units. The correct approach uses total revenue divided by total ad spend.

ROAS is the revenue earned per dollar spent on advertising. To find it, calculate total revenue from the sales and then divide by the ad spend.

Total revenue = 3 units × $100 each = $300. ROAS = $300 ÷ $80 = 3.75. So, for every $1 spent on advertising, you generate $3.75 in revenue.

The other numbers come from misapplying the math: 0.375 would imply only $30 in revenue, 37.5 would imply $3,000 in revenue, and 1.25 would reflect revenue per unit divided by spend rather than total revenue for all units. The correct approach uses total revenue divided by total ad spend.

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