When Companies Calculate the Lifetime Value of a Customer They

question 49

Multiple Choice

When companies calculate the lifetime value of a customer they look at _.

• A)how much profit they expect to make from a particular customer,including each and every purchase s/he will make from them now and in the future
• B)the career path of the customer to see if s/he may move to a different geographic area and no longer purchase from this company
• C)the commission amount the company must pay the sales representative who worked with the customer
• D)the age of the customer to see if s/he may live long enough to utilize the product being sold
• E)the lifetime expectancy of the product the customer purchased

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Definitions:

Conversion Costs

The costs associated with converting raw materials into finished goods, including labor and overhead but excluding the cost of the raw materials themselves.

Equivalent Units

A concept used in cost accounting to express the amount of work done by various components of a manufacturing process in terms of fully completed units.

Weighted-Average Method

The weighted-average method is an inventory costing method that assigns the average cost of all similar items in inventory to the cost of goods sold and ending inventory, smoothing out price fluctuations.

Processing Department

A division within a manufacturing facility where a particular type of processing or production occurs.