Revolutionizing the toilet paper product category


Problem: You just quit your job to start a company revolutionizing the toilet paper product category. You are starting a new subscription service for toilet paper. The subscription service will ship toilet paper monthly to customers and will mostly consist of regular toilet paper, but will always include a couple of surprise and delight rolls. Customers will pay $15 per month, but you only collect the payments at the end of a subscription year. Customers have to sign up for at least year and the subscription renews every year unless the customer cancels. The cost of serving a customer is $100 per year (includes all variable costs) a) You estimate that every year 30% of subscribers will cancel their subscription. What is the maximum amount you would pay for acquiring a customer if you want to break even after 3 years of service? (Do not apply any discounting for this initial calculation.)

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Accounting Basics: Revolutionizing the toilet paper product category
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