Oak Grove Vineyards Recently Set Up an E-Commerce Site to Sell

question 138

Multiple Choice

Oak Grove Vineyards recently set up an e-commerce site to sell monthly wine club subscriptions to its award-winning collection of California wines. The company knows that it will earn $70 in profit in just the first month that each customer subscribes. The marketing manager is using Google Ads to promote the new service, and she has calculated that the conversion cost for her current Google Ad is about $45 per subscriber. What does this data tell her? ​

• A) The ad campaign is profitable as is.
• B) She should discontinue the ad campaign because it's not profitable.
• C) If she could find a way to decrease the conversion cost, she could make the campaign profitable.
• D) She needs to figure out how to increase the profit per subscriber.

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Definitions:

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow, over a similar term and with a similar security, the funds needed to obtain an asset lease.

Leased Equipment

Assets obtained by a company through a leasing agreement, allowing the company to use the equipment without owning it.

Annuity Due

An annuity due is a type of annuity payment in which each installment is paid at the beginning of each period, rather than at the end, typically used in leases and loan repayments.

Capital Lease Obligation

A lease classified as a purchase agreement for accounting purposes, wherein the lessee records the leased asset as an owned asset on the balance sheet.