Homework answers / question archive / Your company is planning to print a catalog of its products and undertake a direct mail campaign

Your company is planning to print a catalog of its products and undertake a direct mail campaign

Accounting

Share With

Your company is planning to print a catalog of its products and undertake a direct mail campaign. The cost of printing the catalog is $20,000 plus $0.10 per catalog.  The cost of mailing each catalog (including postage, order forms, and buying names from a mail-order database) is $0.15. In addition, your company plans to include direct reply envelopes in its mailings and incurs $0.20 in extra costs for each direct mail envelope used by a respondent. The average size of a customer order is $40, and the company’s variable cost per order (due primarily to labor and material costs) averages about 80% of the order’s value—that is, $32. The company plans to mail 100,000 catalogs. Q2: Let us assume a response rate of 6%. Which which % of variable costs (above, 80%) does the company break even. Q3: Report the profits for response rates raning from 3% to 10% (increments of 1%). Use a data table for this exercise. Q4: Report the profits for response rates raning from 3% to 10% (increments of 1%) and fixed printing costs of $10k, $20k, $30k, and 40k. Use a data table for this exercise.