Question
You have been given the task to plan a direct-mail promotion and asked to determine the net profit from the activity. The number of promotional
You have been given the task to plan a direct-mail promotion and asked to determine the net profit from the activity. The number of promotional mails to be send is 2,75,000 and the expected response rate is 2.5%. The cost to print a single mailer is given and unit cost varies with the quantity. 0.20 for quantities less than 200,000; 0.15 for quantities of 200,001 and 300,000; and 0.10 each for quantities more than 300,000. A fixed cost of 0.28 is incurred per unit for mailing. The number of responses is calculated based on the response rate and the number mailed. The company knows that it will realize an average profit per response of 18.50. Calculate the gross profit, Total costs including printing and mailing costs and Net Profit.
The manager of the company wants you to summarize the net profit for various combinations of quantity and response rate. Assume quantity varies from 100,000 to 3,25,000 in multiples of 25,000 and Response rate varies between 1.50% and 3.25% in multiples of 0.25%. The management has asked you to highlight three scenarios to the management as shown in table below. Give relevant names to input and output cells. (Marks=10)
Best Case
325000
3.25%
Worst Case
275000
1.50%
Most Likely
200000
2.50%
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