Judy Barker is vice president of finance for Maryland Crab House Restaurant,which is a chain on the East Coast of the U.S.Judy is considering a coupon promotion which entitles patrons to a 20% discount.The cost of mailing and printing is estimated to be $400,000 and the estimated increase in sales for the year is estimated at $2,500,000 less the 20% coupon discount.To include as part of her analysis,Judy ran a regression on sales data from last year (operating costs and normal sales)and found the following:

Required:
Based on the limited information provided,what estimate would you give Judy as the best net effect of the coupon promotion on annual profit,ignoring taxes?

Question

Judy Barker is vice president of finance for Maryland Crab House Restaurant,which is a chain on the East Coast of the U.S.Judy is considering a coupon promotion which entitles patrons to a 20% discount.The cost of mailing and printing is estimated to be $400,000 and the estimated increase in sales for the year is estimated at $2,500,000 less the 20% coupon discount.To include as part of her analysis,Judy ran a regression on sales data from last year (operating costs and normal sales)and found the following:
  
Required:
Based on the limited information provided,what estimate would you give Judy as the best net effect of the coupon promotion on annual profit,ignoring taxes?

Quizplus · Accepted Answer

The Answer of Judy Barker is vice president of finance for Maryland Crab House Restaurant,which is a chain on the East Coast of the U.S.Judy is considering a coupon promotion which entitles patrons to a 20% discount.The cost of mailing and printing is estimated to be $400,000 and the estimated increase in sales for the year is estimated at $2,500,000 less the 20% coupon discount.To include as part of her analysis,Judy ran a regression on sales data from last year (operating costs and normal sales)and found the following:
  
Required:
Based on the limited information provided,what estimate would you give Judy as the best net effect of the coupon promotion on annual profit,ignoring taxes?

Judy Barker Is Vice President of Finance for Maryland Crab