Insight Research uses focus groups and other techniques to test consumer reaction to new products. The CEO, Manasee Agrawal, is puzzled as to why her profits are so much lower than expected even though her total volume is per projections.
She informs you that she charges client companies $50 per participant. As anticipated, she billed $4 million this year for 80,000 participants. She is proud that she has increased the number of distinct products tested from 10 last year to 18 this year. However, she thinks that she might have taken on too many jobs that did not involve national testing (400–600 groups per product) but rather involved regional tests only (150–300 groups per product). Each group typically has 10 to 20 consumers.
Manasee also informs you that her primary costs are payments to participants ($30 per participant). She also incurs setup costs of about $300 per group session. Setting up a national test incurs up-front costs of $15,000. A regional test costs $10,000.

Required:
a. Suppose Manasee expected to handle eight national products and seven regional products this year for a total of 4,500 groups and 80,000 participants. Estimate her total profit for this mix of groups and jobs.
b. Suppose the actual data show that Manasee had 6 national and 12 regional jobs for this year. The average national job only had 500 groups, and the average regional job had 250 groups. Compute Manasee’s profit with the realized product mix.
c. Comment on the discrepancy between her projected and actual profit.