Parents Against Underage Drinking (PAUD) recently paid $50,000 to sponsor a series of commercials on a local television station. Each commercial is one minute in length. In the first 45 seconds, sports stars plead with teenagers to avoid peer pressure to consume alcoholic beverages. In the remaining 15 seconds, a celebrity solicits funds for the organization and gives a telephone number to call and an address to which to send a contribution. The commercials are scheduled to run during The Real World, a hip MTV program that is popular among the high school set.

1. How much of the cost of the commercials should PAUD allocate to mission-related programs and how much to fund-raising?

a. Assume first that the allocation is to be based on physical units.

b. Assume, alternatively, that the allocation is to be based on stand-alone costs. The cost of a single 45-second commercial would be approximately $40,000; that of a 15-second commercial would be $20,000.

2. Suppose that the organization elected to run the same series of commercials on reruns of the Lawrence Welk Show, a musical variety program that features tunes of the 1950s and appeals primarily to the grandparents of those to whom The Real World is targeted. The cost is the same $50,000. Would your response be the same? Explain.