A Customer's Lifetime Value Is Calculated By

question 12

Multiple Choice

A customer's lifetime value is calculated by:

• A) Summing the projected annual profitability of the customer
• B) Summing the annual sales of the customer and then dividing by the projected lifetime
• C) The firm's MRP system
• D) Finding the NPV of a customer's projected lifetime profits for the firm

Understand the concept of make-or-buy decisions and how to calculate the total costs associated.

Identify the advantages and disadvantages of outsourcing parts of production.

Determine the opportunity costs involved in make-or-buy decisions.

Calculate avoidable fixed costs and their impact on make-or-buy decisions.

---

Definitions:

Maximization Theory

The principle that decision-makers aim to make choices that result in the highest possible benefit or utility.

Behavior Allocation

The distribution of behavioral responses across different situations or stimuli, often influenced by variable reinforcement schedules.

1:2 Contingency

A specific reinforcement schedule where one behavior is reinforced every second time it occurs.

1:1 Contingency

In behavioral psychology, this refers to a situation where every instance of a specific behavior is followed by a particular consequence, ensuring a direct correlation between behavior and outcome.