Services, Failure, and Recovery
Let’s talk about service!
1. Choose a service that you have purchased recently.
· Assess the service using the 7Ps
· What is the service’s core benefit, service provisions, and tangibles (if any)?
· How do the concepts of intangibility, inseparability, inconsistency, and perishability/inventory relate to your service?
2. Describe a time that you experienced a service failure. Did you complain to other consumers? Did you complain to management? What was the outcome? Have you ever exchanged with that company again? Did you experience service recovery? If not, what could the company have done for you to recover from the service failure?
Solve for the following examples (Show ALL OF your work; cut and copy the table into your answer or cut and copy into a word document and upload the document with your answers.
1. An umbrella manufacturing company’s yearly fixed costs are $275,000. The variable cost per unit is $5 and each umbrella is sold at $10.
· How many units does the firm sell per year in order to break even?
2. Using the full-cost pricing method, calculate out the price for a box of chocolates when:
· fixed costs per month (rent, etc.) = $50,000
· variable costs (ingredients, etc.) = $3 per box
· sales volume per month = 100,000
· The accounts department has set 20% as the profit margin.
3. A manufacturer has invested $120,000 in a new product and wants to set a price to earn a $80,000 profit. The variable cost per unit is $20 and the company sells the units at $100. How many units does the company need to sell to reach the target profit?
4. An athletic mouth guard manufacturer has invested $500,000 in the business and wants to set a price to earn a 30 percent return on investment. The company thinks it can capture 1% of the United States’ 18 million athletes at a variable unit cost of $2.50 per mouth guard. What would you price the mouth guard at? Would you go higher or lower than this? WHY?
5. If the cost of a renovation job include permits ($500), supplies ($2000), subcontracted salaries/materials ($4000), and $500 in miscellaneous expenses (such as gas driving to/from job site). The contractor wants to make a 25% markup. What is the price of the job to the customer?
The high-flying Enron Corporation dominated the financial news in the last few months of 2001 and early 2002. The company experienced a collapse in its stock price that was breathtaking. The Enron scandal offers the opportunity to assess the degree to which misleading accounting can affect connected firms and industry rivals.
After reading this article, provide your thoughts and ideas on ACCOUNTING CONTAGION: THE CASE OF ENRON.
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