Answer:
The revenue per customer is computed as:
Revenue per customer = $10 × 12 months'
Revenue per customer = $120
Thus, the revenue will be earned for 12 months.
The variable cost per customer is computed as:
Variable cost per customer = $5 × 14 months
Variable cost per customer = $70
The variable cost will be incurred for 14 months.
The quantity of new client accounts expected to earn back the original investment on the expense of the special crusade is determined as:
Break-even customer = Fixed cost / Contribution margin per customer
Break-even customer = Fixed cost / (Revenue per customer - Variable cost per customer
)
Break-even customer = $4,200,000 / ($120 - $70)
Break-even customer = $4,200,000 / $50
Break-even customer = 84,000 customers)
In this way, the quantity of new client accounts expected to earn back the original investment on the expense of the limited time crusade is 84,000.
