Five people, each working 8 hours a day, can assemble 400 toys in a 5 day work week. What is the average number of toys assembled per hour, per person?
To build relationships, firms focus on the lifetime profitability of the relationship, not how much money is made during each transaction. True False
The correct answer and explanation is:
Answer:
- The average number of toys assembled per hour, per person:
To find the average number of toys assembled per hour per person, we can break down the problem step by step:
- Total number of toys assembled:
5 people working 8 hours a day for 5 days assemble 400 toys.
The total number of hours worked by all 5 people is: 5 people×8 hours/day×5 days=200 hours5 \text{ people} \times 8 \text{ hours/day} \times 5 \text{ days} = 200 \text{ hours} Thus, the total number of hours worked by all employees over the 5-day period is 200 hours. - Average number of toys assembled per hour per person:
The average number of toys assembled per hour per person is calculated by dividing the total number of toys by the total number of hours worked by all the people: 400 toys200 hours=2 toys per hour\frac{400 \text{ toys}}{200 \text{ hours}} = 2 \text{ toys per hour} Since there are 5 people, the average number of toys each person assembles per hour is 2 toys per hour.
- The statement about lifetime profitability of the relationship in firms:
The statement is True. Firms, especially those involved in building long-term relationships with clients or customers, focus on the lifetime profitability of the relationship rather than the immediate gains from a single transaction. This approach is often referred to as a customer lifetime value (CLV) strategy, which emphasizes the long-term benefits a company can derive from repeat business, customer loyalty, and positive referrals.
By prioritizing long-term relationships, firms aim to maximize the total profit generated over time from a customer, rather than focusing on the profit from a single sale or interaction. Companies that adopt this mindset typically invest in customer satisfaction, personalized services, and other value-added services that will keep customers coming back for future purchases. They understand that maintaining customer loyalty is often more cost-effective than constantly acquiring new customers, as repeat customers tend to have a higher retention rate and a greater overall value to the business.
For example, businesses like subscription services, retail loyalty programs, and B2B companies often focus on the long-term relationship with customers, as the ongoing revenue from a loyal customer will likely exceed the profit from one-time transactions. This long-term focus allows companies to build a stable revenue base and reduce the cost of acquiring new customers continuously.