Chapter 8, Problem 8QP Problem A car dealership needs to determine how to allocate its $20,000 advertising budget. The company has estimated the expected profit from each dollar (X) spent in four different advertising media as follows: Medlum Expected Profit Newspaper 100X00.7 Radio 125X0.65 TV 180X0.6 Direct Mail 250X0.5 If the company wants to spend at least $500 on each medium, how should it allocate its advertising budget in order to maximize profit?
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For Direct Mail: Expected Profit = 250 * 0.5 = $125 For Radio: Expected Profit = 180 * 0.6 = $108 For Newspaper: Expected Profit = 125 * 0.65 = $81.25 For Medium media: Expected Profit = 100 * 0.7 = $70 Show more…
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