Ominous Studios, in an effort to promote the release of their new motive \'\'Dra

ID: 2470480 • Letter: O

Question

Ominous Studios, in an effort to promote the release of their new motive ''Dragons from Space,'' began a national sales promotion campaign. Two coupons from specially marked boxes (one coupon in each box) of ''Sweet Pops'' cereal are redeemable for one ticket to the show. Tickes cost Ominous $1.50 each. Ominous estimates that 40 percent of the coupons will be redeemed. At the end of 2014, the following information is available:

What is the estimated liability for premium claims outstanding at December 31, 2014?

Boxes of cereal sold 660,000 Movie tickets purchased by Ominous 140,000 Coupons redeemed 250,000

Explanation / Answer

Number of coupons available

660,000

Expected redemption rate

´ 40%

264,000

(two coupons per ticket)

´ 50%

Estimated premiums

132,000

Premiums redeemed to date (250,000/2 coupons per ticket)

125,000

Expected remaining premiums

7,000

7,000 tickets ´ $1.50 each =

$ 10,500