HRP 111 - Assignment 2 (1)

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Canadore College *

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HRP 106

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Business

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Apr 3, 2024

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HRP 111 – Assignment #2 Case Study 1 Case Study 1 Constructed Response Answer The breakeven point is a point at which there is no profit and no loss. Total revenue covers total costs. We know that 5000 cakes will be sold and that there are already fixed costs amounting to 12500. Variable cost per cake is 10. Contribution per cake = selling price - variable cost = SP - 10 At breakeven point, Total contribution = fixed cost. When there is no advertisement expense, it means that 500 x(SP-10)=12,500 SP=(125000 )+10=$12.5 (5000) They can break even without paying for advertisements by charging just $12.5 per cake while the competitors are selling for $20 per cake

According to Loren, the selling price should be $20 and advertisement costs will be $3000 That brings up the fixed cost to $15,500 Profit = 5,000x20-5000x10-15,500=$34,500. According to Vivian, the selling price should be 10% less than the competitors. So, the selling price = 20-10%=$18 per cake. Also, she thinks advertisement costs can be avoided by advertising on social media. Profit = 5000x18-5000x10-12500=$27500. It is more profitable to go with Loren's opinion, at a selling price of $20 and an advertising budget of $3000. Case Study 2 Gordon Sparks Ltd. sells ergonomic chairs. The company implemented a new bonus structure for all of their managers. If net income increased from the previous year, managers would be rewarded with 0.5% of the increase in net income. In January of last year, Mingle Nicholson was hired as the manager of the marketing department. As the marketing manager, he was responsible for seeking external opportunities, managing budgets and understanding the current and potential customers. Every three or four days, Mingle would meet with the sales manager, Logan Freidman. The meeting was usually about past sales, and whether there were changes to the selling strategy. This information was extremely important to Mingle, since he was responsible for ensuring the marketing objectives are aligned with the sales objectives. During the year, Mingle made several changes to Gordon Sparks’ marketing strategy. Mingle created a set of popular commercials, which were a complete success. Each commercial reached over 5,000,000 views on YouTube. However, by the end of that year, Mingle realized that he did not receive a bonus from the company because the company’s overall financial performance remained the same. Discuss the appropriateness of the company’s bonus policy. Case Study 2 Constructed Response Answer According to the agency's incentive programmer, advertising supervisors receive a 5% bonus on online earnings earned in previous years. This bonus programmer will encourage managers to increase their earnings. However, due to other costs and other expenditures, such money may not necessarily come to be in the rise of online income. However, the bonus policy would incorporate some proportion of online earnings as well as a few percent of internet gain in the previous year's income. The marketing manager is solely responsible for increasing revenue. Other operational costs are beyond his control As a result, this strategy will not inspire managers since it will result in a lack of motivation based on the mistakes of other departmental managers. As a result, a little modification to the current policy might

be made by providing a few more bonuses for income growth Case Study 3 Constructed Response Answer Case Study 3 Constructed Response Answer a) Net Present Value is a process used by investors or analysts to evaluate the profit of the project proposed. NPV = Present value of cash flow - Initial Investment Computation of Net Present Value Broomsticks Magic wands Crystal Balls

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Sales $500,000 $450,000 $650,000 The costs of goods sold $80,000 $50,000 $32,000 Gross Margin $420,000 $400,000 $618,000 Marketing and administrative expense $100,000 $130,000 $22,000 Net income /cash flow(a) $320,000 $270,000 $596,000 Present value factor 10% 5 years (b) 3.7908 3.7908 3.7908 Present value of cash flow(a x b) $1,213,056 $1,023,516 $2,259,317 Less initial investment $1,170,00 $983,000 $2,210,000 Net Present value $43,056 $40,516 $49,317 Case Study 3 Constructed Response Answer b) Hocus Pocus should invest in Broomsticks as NPV is higher as compared to Magic Wands. It cannot invest in Crystal Balls as the budget is restricted to $1,500,000 but Crystal Balls requires an investment of $2,210,000. Case Study 3 Constructed Response Answer c) If Hocus Pocus had a capital budgeting line of $2,300,000 then he should invest in Broom Stick and Magic Wand both Investment in Broomsticks $1,170,000 Investment in Magic Wands $983,000 Total investment $2,153,000 Total Investment is within the capital budget limit of $2,300,000. Total NPV ($43,056+$40,516) $83,572 NPV is $83,572 which is higher than Crystal Ball's NPV.

HRP 111 - Assignment 2 (1)

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