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Breakeven Analysis: (10 points) You're an expert in direct mail marketing and promotions and have been asked to consult on a project for Mom & Pop Inc. The M&P Executives (your parents) believe they have a compelling product because it has generated $60 in profit (excluding costs before promotions) per sale. They would like to expand via a direct mail campaign offer. You know on average it costs $0.15 per name in list-rental costs, plus $0.75 per name to handle all other mailing costs.
i. What is the response rate needed for MP Inc. to breakeven, assuming average promotional costs?
ii. After the campaign has been launched response rates are 7%, and profit (excluding promotional costs) is at $60 per response. But you know that promotional costs will be increasing to $1.50 per name. What is the increased response rate MP needs to maintain current profit levels, yet still cover the increased costs?
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