abyGap.com is considering how to increase demand for its line of infant clothes. One proposal is to buy a mailing list with? 100,000 names of recent parents who have household incomes greater than? $40,000 and send them each a coupon for? $5 for purchase at the web site. Gap has to pay? $0.50 for each name on the list. It will also incur a mailing cost of? $0.50 for every mail it sends out. Gap expects the average customer responding to such a promotion will buy clothes worth? $50.00 at the web site? (including shipping and handling? charges). The average cost for Gap for the clothes will be? $20.00. The industry average for purchases arising from such targeted mailings is roughly? 6%.
Compute the contribution margin.? ($)
Compute the fixed cost for Gap if it used this strategy.? ($)
Compute the breakeven quantity.
Compute Expected Sales based on Industry Average
If Gap wants to make at least? $100,000 from this? campaign, Compute Sales in Units needed.