A Computer Manufacturer Currently Has a 15 Percent Customer Defection

question 8

Multiple Choice

A computer manufacturer currently has a 15 percent customer defection rate. Their accounting department estimates the incremental contribution to profit and overhead as 30 percent. Customers purchase computers every four years at an average cost of $1,200. In an effort to reduce the defection rate, the company is improving both the quality of its computers and its post-sale service. Determine the value of a loyal customer if the defection rate drops to 5 percent.

• A) Less than or equal to $500
• B) More than $500 and less than or equal to $1,000
• C) More than $1,000 and less than or equal to $1,500
• D) More than $1,500 and less than or equal to $2,000