9.24 During late 2019, Ski Lifters commenced a new business in the Alpine region to rent ski gear to tourists. A budget has been prepared for the coming financial year. Prepare a brief report to management on how the budget can be used as a control device to monitor actual performance. Using the budget as a control device suggests using the budget to monitor the position of the firm. In this case, Ski Lifters might use the budget prepared on a monthly basis by comparing actual performance against planned performance. This will enable the identification of variances which will provide the feedback to determine if plans need to be changed; and the variances may also serve as a starting point for reviewing future estimates. Variances can be identified for sales and operating expenses which will assist in understanding why the actual profit is different to that budgeted at the beginning of the year. Problems 11.28 Market-based pricing, customer preferences Transrapid is a magnetically levitated train that connects Shanghai to Pudong International Airport at a speed of 268 miles per hour. Engineers developed a system with trains departing every 15 to 20 minutes. Suppose Transrapid asked you to research customer preferences and to recommend a pricing policy. It costs considerably more to have trains depart as frequently as 15 to 20 minutes apart, so a cost-based pricing schedule will result in ticket prices that are considerably higher than alternative modes of transportation. Required 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 9.24 During late 2019, Ski Lifters commenced a new business in the Alpine region to rent ski gear to tourists. A budget has been prepared for the coming financial year. Prepare a brief report to management on how the budget can be used as a control device to monitor actual performance. Using the budget as a control device suggests using the budget to monitor the position of the firm. In this case, Ski Lifters might use the budget prepared on a monthly basis by comparing actual performance against planned performance. This will enable the identification of variances which will provide the feedback to determine if plans need to be changed; and the variances may also serve as a starting point for reviewing future estimates. Variances can be identified for sales and operating expenses which will assist in understanding why the actual profit is different to that budgeted at the beginning of the year. Problems 11.28 Market-based pricing, customer preferences Transrapid is a magnetically levitated train that connects Shanghai to Pudong International Airport at a speed of 268 miles per hour. Engineers developed a system with trains departing every 15 to 20 minutes. Suppose Transrapid asked you to research customer preferences and to recommend a pricing policy. It costs considerably more to have trains depart as frequently as 15 to 20 minutes apart, so a cost-based pricing schedule will result in ticket prices that are considerably higher than alternative modes of transportation. Required 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
