The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers) will vary depending upon the success of the new cable television network she plans to use, as follows: If she feels that there is a 60 percent chance that the new cable network will be successful, what is her expected cost (per thousand "hits") for the strategy she will select?
A) $3.40
B) $4.60
C) $8.00
D) $9.00
E) $10.00

Question

The advertising manager for Roadside Restaurants, Inc., needs to decide whether to spend this month's budget for advertising on print media, television, or a mixture of the two. She estimates that the cost per thousand "hits" (readers or viewers) will vary depending upon the success of the new cable television network she plans to use, as follows:  If she feels that there is a 60 percent chance that the new cable network will be successful, what is her expected cost (per thousand "hits") for the strategy she will select?
A) $3.40 
B) $4.60 
C) $8.00 
D) $9.00 
E) $10.00

Quizplus · Accepted Answer

To determine the expected cost per thousand "hits" for each advertising strategy, we need to calculate the weighted average of the cost per thousand "hits" for the two options (print media and television).

For print media, the cost per thousand "hits" is $8.50. For television, the cost per thousand "hits" will depend on the success of the new cable network. If the network is successful, the cost per thousand "hits" will be $7.00. If it is not successful, the cost per thousand "hits" will be $10.00.

To calculate the expected cost per thousand "hits" for the television option, we need to take into account the 60% chance of success. So the expected cost per thousand "hits" for television would be:

Expected TV cost per thousand "hits" = (0.6 x $7.00) + (0.4 x $10.00) = $8.20

To determine the best choice(s), we need to compare the expected cost per thousand "hits" for each option.

- Print media: $8.50 
- Television: $8.20 
- Mix of both: This option is not given, so we cannot calculate the expected cost per thousand "hits."

Based on these calculations, the advertising manager should choose the television option, as it has the lowest expected cost per thousand "hits."

The Advertising Manager for Roadside Restaurants, Inc