Suppose a company did $2.000.000 in annual maintenance in 2013 and expects 80% of those to renew for 2014. Suppose that product sales for 2013 were $2,000,000 (which included free maintenance in 2013) and 75% of those were expected to pay an annual maintenance of 10% of the purchase price in 2014. What will be the annual maintenance collected in 2014?

Question

ab8s1k28q · Accepted Answer

In year 2013 annual maintenance done = $ 2,000,000Out of this 80% is expected to renew in   2014  =      $    2  ,  000  ,  000  ⋅  0.8  =      $    1600000Now Sales in 2013 = $2,000,00075% of these sales   =  0.75      $    ⋅  2  ,  000  ,  000  =      $    1500000Now out of this 75% , 10% annual maintenance was expected to be paidin   2014  =  0.10  ⋅      $    1500000  =      $    150000So, Total annual maintenance in 2014 = $ 1600000 + $150000= $1750000