To examine the effectiveness of its four annual advertising promotions, a mail order company has sent a questionnaire to each of its customers, asking how many of the previous year's promotions prompted orders that would not have otherwise been made. The accompanying table lists the probabilities that were derived from the questionnaire, where X is the random variable representing the number of promotions that prompted orders. If we assume that overall customer behavior next year will be the same as last year, what is the expected number of promotions that each customer will take advantage of next year by ordering goods that otherwise would not be purchased? Expected value = X 0 1 2 3 4 P(X) 0.1 0.203 0.313 0.177 0.207 A previous analysis of historical records found that the mean value of orders for promotional goods is 31 dollars, with the company earning a gross profit of 23% on each order. Calculate the expected value of the profit contribution next year. Expected value = The fixed cost of conducting the four promotions is estimated to be 16000 dollars with a variable cost of 2 dollars per customer for mailing and handling costs. What is the minimum number of customers required by the company in order to cover the cost of promotions? (Round your answer to the next highest integer.) Breakeven point =
To examine the effectiveness of its four annual advertising promotions, a mail order company has sent a questionnaire to each of its customers, asking how many of the previous year's promotions prompted orders that would not have otherwise been made. The accompanying table lists the probabilities that were derived from the questionnaire, where X is the random variable representing the number of promotions that prompted orders. If we assume that overall customer behavior next year will be the same as last year, what is the expected number of promotions that each customer will take advantage of next year by ordering goods that otherwise would not be purchased? Expected value = X 0 1 2 3 4 P(X) 0.1 0.203 0.313 0.177 0.207 A previous analysis of historical records found that the mean value of orders for promotional goods is 31 dollars, with the company earning a gross profit of 23% on each order. Calculate the expected value of the profit contribution next year. Expected value = The fixed cost of conducting the four promotions is estimated to be 16000 dollars with a variable cost of 2 dollars per customer for mailing and handling costs. What is the minimum number of customers required by the company in order to cover the cost of promotions? (Round your answer to the next highest integer.) Breakeven point =
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:To examine the effectiveness of its four annual advertising promotions, a mail order company has sent a questionnaire to each of its
customers, asking how many of the previous year's promotions prompted orders that would not have otherwise been made. The
accompanying table lists the probabilities that were derived from the questionnaire, where X is the random variable representing
the number of promotions that prompted orders. If we assume that overall customer behavior next year will be the same as last
year, what is the expected number of promotions that each customer will take advantage of next year by ordering goods that
otherwise would not be purchased?
Expected value =
A previous analysis of historical records found that the mean value of orders for promotional goods is 31 dollars, with the company
earning a gross profit of 23% on each order. Calculate the expected value of the profit contribution next year.
Expected value =
хо 1 2 3 4
P(X) 0.1 0.203 0.313 0.177 0.207
The fixed cost of conducting the four promotions is estimated to be 16000 dollars with a variable cost of 2 dollars per customer for
mailing and handling costs. What is the minimum number of customers required by the company in order to cover the cost of
promotions? (Round your answer to the next highest integer.)
Breakeven point =
E
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