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Zeen by Cambridge sells hand-knit sweaters. Zeen is planning to print a catalog of its products and undertake a direct mail campaign. The cost
Zeen by Cambridge sells hand-knit sweaters. Zeen is planning to print a catalog of its products and undertake a direct mail campaign. The cost of printing the brochure is Rs. 220,000 plus Rs10 a catalog. The cost of mailing each catalog is Rs.200. In addition, the company will include direct reply envelopes in its mailings. If a customer places an order upon receiving the catalog, he/she will use the direct reply envelope to mail it back, and it costs the company extra Rs 50 in postage for each direct mail envelope used by a respondent. If a customer does not place an order, the direct reply envelope will not be used, and no extra cost is incurred for the company. The average value of a customer order is Rs7000, and the company's variable cost per order averages around 75% of the order's value. The company plans to mail 400,000 catalogs, and it expects the response rate (percentage of customers that mails back an order) to be at 8%. It wants to develop a spreadsheet model to analyze its profit.
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