For purposes of analysis, you can assume that it will cost $3.25 for every customer who...
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For purposes of analysis, you can assume that it will cost $3.25 for every customer who is offered VIP Service, regardless of whether or not they end up purchasing anything from eTOTS.com during the holiday season (you can think of this as the cost of telling the selected customers about the new VIP Service). In addition, any customers receiving VIP Service who do make a purchase during the holiday season will incur incremental costs of $20.00 (you can think of this as the cost of delivering the VIP Service to those customers who do business with us during the holiday season). The benefit of VIP Service will be the incremental profit (assume 40% profit margin) on the increased sales (assume 50% higher sales) that the customers who receive VIP Service will make. For example, a customer offered VIP Service who makes no purchases will have a cost of $3.25 (and no benefits), whereas a customer offered VIP Service who would have purchased $200.00 from eTOTS.com during the holiday season (even without VIP Service) would have a cost of $23.25 ($3.25 + $20.00) and a benefit of $40.00 (40% profit margin on the extra $100.00 in sales caused by VIP Service) Use the Training dataset to complete the following tasks. 1. (20 points) If you provided VIP Service to all customers in the data, what would be your total cost? Total benefit? Are you better offering VIP Service to all customers or no customers? For purposes of analysis, you can assume that it will cost $3.25 for every customer who is offered VIP Service, regardless of whether or not they end up purchasing anything from eTOTS.com during the holiday season (you can think of this as the cost of telling the selected customers about the new VIP Service). In addition, any customers receiving VIP Service who do make a purchase during the holiday season will incur incremental costs of $20.00 (you can think of this as the cost of delivering the VIP Service to those customers who do business with us during the holiday season). The benefit of VIP Service will be the incremental profit (assume 40% profit margin) on the increased sales (assume 50% higher sales) that the customers who receive VIP Service will make. For example, a customer offered VIP Service who makes no purchases will have a cost of $3.25 (and no benefits), whereas a customer offered VIP Service who would have purchased $200.00 from eTOTS.com during the holiday season (even without VIP Service) would have a cost of $23.25 ($3.25 + $20.00) and a benefit of $40.00 (40% profit margin on the extra $100.00 in sales caused by VIP Service) Use the Training dataset to complete the following tasks. 1. (20 points) If you provided VIP Service to all customers in the data, what would be your total cost? Total benefit? Are you better offering VIP Service to all customers or no customers?
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Related Book For
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
Posted Date:
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