ABCDEFGHIJKLMNOPQRSTUVWXYZ
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Catalog inputsModel of responses
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Fixed cost of printing$20,000Response rate6%
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Variable cost of printing mailing$0.25Number of responses5770
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Decision variable
Model of revenue, costs, and profit
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Number mailed100000Total Revenue230800
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Fixed cost of printing$20,000
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Order inputs
Total variable cost of printing mailing
$25,000
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Average order$40Total variable cost of orders$185,794
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Variable cost per order$32.20Total cost$230,794
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Profit$6
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Sensitivity of profit to response rate
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Response rateProfit
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$6
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1%-$37,200
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2%-$29,400
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3%-$21,600
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4%-$13,800
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5%-$6,000
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6%$1,800
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7%$9,600
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8%$17,400
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9%$25,200
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10%$33,000
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Breakeven response rate = 5.77%
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