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Lifecycle profit

NNikita5y ago
Hello Sir, Hope you are keeping well! Question - A bank has developed a new type of account called the Gold Account. Development and advertising costs were $50,000. At the start of each of the next four years, 1,000 customers are expected to open a Gold Account and to pay the bank $300 each year that they use it....... The above question is from BPP .. My question - Can you explain what did they do in answer as I was completely off the track by looking at the answer. can you just please briefly explain m sure I will understand it .. Thank you in advance !
John MoffatJohn MoffatTutor5y ago#1
In the first year there are 1,000 Gold customers and they lose the bank 400 – 300 = 100 each. So the bank loses a total of 100,000. In the second year there are left 500 Gold customers, and they gain the bank 300 – 50 = 250 each, so the bank gains a total from them of 250 x 500 = 125,000. So a profit from those original 1,000 customer of $25,000. This happens 4 times because 1,000 new customers occur each year, so a total of 4 x $25,000 = $100,000. Subtracting the advertising costs gives a total lifetime profit of $50,000. Dividing by the number of customers gives $12.50 profit per customer.
NNikita5y ago#2
Thank you so much sir for explaining this in such a simply way. You are the best .. Thanks...
John MoffatJohn MoffatTutor5y ago#3
You are welcome :-)
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