SafeCo Insurance Company provides you with the following data:
..........................................................................................Cost per activity unit
Cost of getting an application from a new customer (for 1, 2 or 3 products)................... $450
Cost of getting an application for a new product from an existing customer................... $150
Credit check (required for all new customers)........................................................ $25
Administrative cost per customer (independent of number of products)......................... $50
SafeCo informs you that when an existing customer adds a new product (e.g., adds an auto policy to her home insurance policy), the company does not perform a new credit check.
Required:
Calculate the cost of processing an application for each of the following three customer types: (1) New customer adding one product; (2) New customer adding 3 products; and, (3) an existing customer adding one product