# In addition to customer preferences, what information would you like to gather before recommending a pricing policy

Question 1
The “Online” group has developed a series of webinars for student focusing on ‘How to be motivated in
the online environment’. Their package delivers 12 x 1 hour per week motivational webinars targeted to
students around the world due to the Covid-19 pandemic and the fact that many courses have moved to
virtual classrooms. “Online” has asked you to research customer preferences and to recommend a
pricing policy. There are limited price differences relating to the timing of webinars in the Northern
Hemisphere, however for Southern Hemisphere webinars running a class at or below 45 students
(normal class size is 50) costs significantly more for “Online” to run.
Required (200 words):
a. In addition to customer preferences, what information would you like to gather before
recommending a pricing policy? Explain why each item you list is relevant.
b. Explain why it is important to understand customer preferences before investing in the infrastructure
to run the system.
c. Is the need to consider customer preferences different for this organization than for another type of
organization? Why or why not?
Question 2
Given you are constrained to your house due to Covid-19, you have decided to try and launch your own
Required (200 words):
a. Design a small business and document 1 key product that you are selling. Name your business and
product with a brief description of its purpose. In a table (please use the one below) list a maximum
of 10 costs that will be involved in selling your product and explain why they are either a variable or
fixed cost and their unit value.
Name of Cost Fixed/Variable \$Value per item Explanation as to why fixed or variable
b. Estimate a reasonable selling price per unit for your product with an explanation as to how you
determined your selling price.
c. Using your figures calculate your Breakeven point, in both units and dollars (\$) showing all
calculations.
d. State whether you require a profit of either \$5,000, \$15,000 or \$30,000 and then calculate your new
breakeven point, in both units and dollars (\$) showing all calculations.
e. Define and calculate the ‘Margin of Safety’, in both units and dollars, assuming you sell 35,000 units.
Ensure you include all calculations.
An example of a Business could be “Keep your pets happy” with your specialty being chew toys for your
dog delivered to your door. Your product is “Chewy the bone” and some example costs are purchasing 2
parts to make the toy, electricity to run your business in your shed, internet to be able to take your
orders, petrol costs to run your car for delivery.
Please keep this reasonably simple to demonstrate your knowledge. I do realize there are many more
costs involved but you don’t need to list everyone, up to 10 is what I am looking for to maximize the
mark.
Question 3
Air New Zealand and Qantas are two well-known airlines providing flights in the Australian tourism
market. They are both listed on the Australian Stock Exchange with Air New Zealand trading under the
code AIZ and Qantas trading under the code (QAN). In the table below is an extraction of ratios as at 30
June 2019.
2019 Air New Zealand and Qantas
Ratio Category Ratio Name Air NZ Qantas
Profitability Ratios Profit Margin (%) 4.67 5.12
ROE (%) 12.92 26.25
ROA (%) 4.19 5.49
Asset Efficiency Ratios Days Inventory 5.11 7.55
Days Receivables 27.76 20.14
Days Payables 36.91 51.23
Liquidity Ratios Current Ratio 0.68 0.49
Quick Ratio 0.65 0.45
Capital Structure Ratios (Solvency Ratios) Gross Gearing (D/E) (%) 124.32 152.04
Net Interest Cover (interest coverage ratio) 13.06 7.89
Market Performance Ratios PER (Price earnings ratio) 11.34 9.82
Required (350 words):
Write a report briefly describing each ratio and which company is performing best based on each ratio.
Include an overall conclusion as to which company you would recommend based only on the data you
have been provided in this question and justify your selection.
Question 4
‘Overnight Housing’ is a not-for-profit enterprise who provide emergency housing for those who find
they are without a safe place to stay overnight. They also have a motel with excellent sea views that
they are trying to determine whether they should expand and add an additional 10 rooms as their
customers cross subsidise their emergency housing service. Any empty motel rooms are also utilised to
provide overnight housing. ‘Overnight Housing’ have performed the calculations and found the
following:
Method Result
Accounting Rate of Return 2.85%
Payback Period 12-13 years
Net Present Value \$9,545 positive
Required (250 words):
a. Explain each method listed above and what it tells the business, determine and list the decision rule
that applies for each method (you need to determine a reasonable number) and include one advantage
and one disadvantage of each method (do not repeat advantages or disadvantages).
b. Review the results individually, compare them with your estimated decision rule, and determine
whether you can individually accept the proposed project for each method.
c. Draw an overall conclusion as to whether, based on the 3 methods, you would recommend the
project.
NOTE: when providing your answer to part (c) you need to give consideration to the type of business
that is being run by ‘Overnight Housing’.