Question

A company that is selling computer tablets has determined that it regularly makes a net profit of $180 for each computer tablet they sell. The company decides to start a rebate program in which they will give a $30 rebate VISA gift card for anyone that fills out the rebate forms. The actuary at the company predicts that only 18% of the people that purchase their tablets will successfully fill out the paper work and use the $30 rebate. What should the company expect their net profit per tablet sold to drop to after the rebate program? (The company will still earn $180 net profit for most customers)

Answer 1

Answer:

Considering the prediction of people who will fill out the form and receive the refund, the company should expect its net profit to drop to:

• $174.6 per computer tablet.

Step-by-step explanation:

The benefit per tablet before the rebate program is $180 per computer tablet, however, once the rebate program is implemented, 18% of people who purchase their computer tablet are expected to complete the form and obtain the VISA card, which would reduce the benefit as shown below:

• 18% benefit from computer tablets = original benefit - refund value.
• 18% benefit from computer tablets = $180 - $30 = $150

With this we identify that 18% of computer tablets will have a benefit reduced to $150, however, as the remaining percentage of tablets (82%) will still have the benefit of $180, the general benefit must be calculated to have a single value, as it's shown in the following:

• Overall benefit = Percentage of tablets with reimbursement * Benefit of tablets with reimbursement + Percentage of tablets without reimbursement * Benefit of tablets without reimbursement.
• General profit = 18% * 150 + 82% * 180
• General profit = $ 174.6

By having a $ 30 rebate on 18% of the tablets, the overall benefit drops to $174.6.