Question

Suppose a company did $2,000,000 in annual maintenance in 2007 and expects 90% of those to renew for 2008. Suppose that product sales for 2007 were $2,000,000 (which included a free year of maintenance) and 70% of those were expected to pay an annual maintenance of 15% of the purchase price in 2008. What will be the annual maintenance collected in 2008?

Answer 1

The annual maintenance collected in 2008 is $201,000

Step-by-step explanation:

The computation of the annual maintenance collection is shown below:

For the year 2007

= Annual maintenance × renew percentage

= $2,000,000 × 90%

= $180,000

For the year 2018

= Product sales × paying percentage × purchase percentage

= $2,000,000 × 70% × 15%

= $21,000

So, the annual maintenance collected equals to

= 2017 annual maintenance + 2018 annual maintenance

= $180,000 + $21,000

= $201,000