The Director of Marketing for Acme Inc. is planning his marketing budget for 2014. For a particular product, the Director of Marketing is planning to split his budget between advertising expenses and mail-in rebates. (A mail-in rebate means that, once a customer has bought the product, he mails the receipt to the company, and the company will send the customer a check for the amount of the rebate. We will assume that all customers who buy the product receive the rebate). The rebate can be offered in increments of 25 cents. Sales (units sold) are approximated by the following demand equation: (5000*(A^0.1)) + (10*(R^1.2)) i.e., (5000 times the Advertising Expenses raised to 0.1) plus (10 times the Rebate Per Unit raised to 1.2) where: A is the Advertising Expenses R is the rebate per unit Marketing expenditures are the sum of the advertising expenses and the total rebate costs. Total rebate costs are given by number of units sold times the rebate. The Calendar Shop Each year The Calendar Shop orders calendars for the coming year. Anticipated demand for the coming year is for 2000 calendars. The Shop's fixed costs are $750. Each calendar cost $3 and The Calendar Shop sells each one for $5.00. At the end of July during the next year, The Shop will reduce the calendar price to 60% of the original selling price and will sell all the surplus calendars at this price. Assume the original selling price varies from $4.00 to $7.25 in increments of $0.25. The Calendar Shop can order in increments of 250 calendars up to a maximum of 4000 calendars. Answer the questions below. For each question, start with the original conditions given here.
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QUESTION 1

1. See Acme Inc. demand equation. If the advertising expenses are $1.1 million and the rebate is $3.00, then the number of units sold will be:

   	A.	20,418
   	B.	20,133
   	C.	177,698,950
   	D.	None of these options

See Acme Inc. demand equation. The demand equation suggests that with zero rebates:

	A.	Sales will be approximately 21438 units if advertising expenditures are two million
	B.	Sales will be approximately 21438 units if advertising expenditures are 2.1 million
	C.	Sales will be approximately 33142 units if advertising expenditures are 1.8 million
	D.	None of these options

QUESTION 13

1. The Calendar Shop will make a profit of $5,200 at a sale price of _____ and order quantity of _____ :

   	A.	$6.75 and 1,750
   	B.	$6.00 and 3,250
   	C.	$5.75 and 3,000
   	D.	$5.00 and 3,750

QUESTION 14

1. The Calendar Shop will make a profit of $7,250 at a sale price of _____ and order quantity of _____ :

   	A.	$6.00 and 4,000
   	B.	$6.50 and 3,250
   	C.	$7.00 and 2,000
   	D.	$7.25 and 1,000