Question

Troista Mobile Accessories sells mobile apps on their Web site. If a customer spends on average, $12 per visit and visits the Web site 20 times each year, what is the average nondiscounted gross profit during a customer's lifetime? Given that Troista makes a margin of 60 percent on the average bill, with 25 percent of customers not returning each year.

Answer 1

Answer: The required average is $576.

Step-by-step explanation:

Since we have given that

Percent of customers not returning each year = 25%

Average customer lifetime = $\dfrac{1}{0.25}=4\ years$

Percent of margin on the average bill = 60%

Cost per visit = $12

Number of times each year visited = 20 times

So, Average expense by each customer per year = $12\times 20=\ 240$

Average margin = 60% of 240 = $0.6\times 240=\ 144$

Average non discounted gross profit during a customer's lifetime is given by

$144\times 4=\ 576$

Hence, the required average is $576.