Question

In: Statistics and Probability

Catalog sales companies mail seasonal catalogs to prior customers. The expected profit from each mailed catalog...

Catalog sales companies mail seasonal catalogs to prior customers. The expected profit from each mailed catalog can be expressed as the product below, where p is the probability that the customer places an order, D is the dollar amount of the order, and S is the percentage profit earned on the total value of an order.

Expected Profit = p X D X S

Typically 12% of customers who receive a catalog place orders that average $180, and 15% of that amount is profit.

Complete parts (a) and (b) below.

(a) What is the expected profit under these conditions? $ per mailed catalog

(b) The response rate and amounts are sample estimates. If it costs the company $2.00 to mail each catalog, how accurate does the estimate of p need to be in order to convince you that the expected profit from he next mailing is positive?

Expert Solution

given that

Catalog sales companies mail seasonal catalogs to prior customers. The expected profit from each mailed catalog

the information about P which is the probability that consumer places an order, D which is the dollar amount of order and S which is the percentage profit earned on the total revenue of an order

a) find the expected profit under the condition.

the information about the P is 10% of customers who receive a catalog place orders, D is $ 125 of order and S is 20% profit earned on the total revenue of an order for compute expected profit.

it is given that the expected profit from each mailed catalog can be expressed as,

expected profit

therefore, the expected profit under the condition is

b) from the result of part (a), the expected profit under the condition is

it is given that cost the company to mail each catalog and customers who receive a catalog place orders is

determine the estimated profitable using the formula,

estimate profitable

the response rates and amounts are sample estimates.if it cost the company to mail each catalog,the accuracy does estimate of P need to be in order to convince us that the next mailing is going to be profitable is

orchestra answered 1 year ago

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