Question

KC Marketing (KC) makes the following specialized campaigns for its customers:

KC will prepare a TV commercial for $1.5M, an app for $500K, and a Facebook page for $500K. The TV commercial, the app, and the Facebook page are not interrelated. If a customer purchases all items, the total cost is $1.5M, which the customer will pay upon signing the contract. Furthermore, only and only if the app is downloaded more than 10,000 times in the first month, KC will receive a one-time bonus of $100K. The agreement creates enforceable rights and obligations. Before the end of the fiscal quarter, the app was not actually downloaded more than 10,000 times in the first month. How much revenue will KC allocate to the app?

a.
$400K

b.
$600K

c.
$1.5M

d.
$300K

e.
$500K

Answer 1

• Cost of the app = $500K
• The TV commercial, the app, and the Facebook page are not interrelated.
• If the app is downloaded more than 10,000 times in the first month, KC will receive a one-time bonus of $100K, but the app was not actually downloaded more than 10,000 times in the first month.
• Hence, KC will allocate $500K to the app.

Answer is e. $500K

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