An athletic footwear company is attempting to estimate the salesthat will result from a television advertisement campaign of itsnew athletic shoe. The contribution to earnings from each pair ofshoes sold is $40. Suppose that the probability that a televisionviewer will watch the advertisement (as opposed to turn his/herattention elsewhere) is 0.40. Furthermore, suppose that 1% ofviewers who watch the advertisement on a local television channelwill buy a pair of shoes. The company can buy televisionadvertising time in one of the time slots according to Tablebelow:
Television advertising costs and viewers
| Time Slot | Cost of Advertisement ($/minute) | Estimated number of viewers |
| Morning | 120,000 | 1,000,000 |
| Afternoon | 200,000 | 1,300,000 |
| Prime Time | 400,000 | 3,200,000 |
| Late evening | 150,000 | 800,000 |
(a) Suppose that the company decides to buy one minute ofadvertising time. Which time slot would yield the highest expectedcontribution to earnings net of costs? What is the total expectedcontribution to earnings resulting from the advertisement?
(b) Suppose the company decides to buy two one-minuteadvertisements in different time slots. Which two different timeslots should the company purchase to maximize the expectedcontribution to earnings? What is the total expected contributionto earnings resulting from these two advertisements?
