A Pelton Turbine Manufacturer Currently Has a 20 Percent Customer

Essay

A Pelton turbine manufacturer currently has a 20 percent customer defection rate. Their accounting department estimates the incremental contribution to profit and overhead as 40 percent. Customers purchase computers every four years at an average cost of $2,000. In an effort to reduce the defection rate, the company is improving both the quality of its computers and its post-sale service. Determine the increase in the average value of a loyal customer if the defection rate drops to 10 percent.