Question

Suppose a company did $2,000,000 in annual maintenance in 2013 and expects 80% of those to renew for 2014. Suppose that product sales for 2013 were 2,000,000(which include free maintenance in 2013) and 75% of those were expected to pay annual maintenance of 10% of the purchase price in 2014. What will be the annual maintenance collected in 2014?
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Answer 1

Answer:

$1,750,000

Step-by-step explanation:

The company did $2,000,000 in annual maintenance in 2013 and expects 80% of those to renew for 2014.

That will result in annual maintenance of:

(80 / 100) * 2000000 = $1,600,000

The product sales for 2013 were 2,000,000 (which include free maintenance in 2013) and 75% of those were expected to pay annual maintenance of 10% of the purchase price in 2014.

That will result in annual maintenance of:

(75 / 100) * (10 / 100) * 2000000 = $150,000

Therefore, the total annual maintenance will be:

$1600000 + $150000 = $1,750,000