Need help with #4 and #5 please have been trying non stop and can't seem to figure it out
ShopOnline Inc. is a small IT company that takes care of website development and IT securities for its parent company's online shopping website. The parent company is a large retailer in North American that had successfully developed an online purchase option that ships globally. To maintain simplicity, ShopOnline book all costs as overhead costs and bill the parent company quarterly. Now that the online store is running successfully, Shop Online had freed up some capacity. During the pandemic in 2021, many small businesses are trying to convert to e- commerce and had approached to ShopOnline for website developments. To work with external clients, Shop Online now needs to come up with a pricing system. You, as the manager at Shop Online, determined that if they price a project at 1.25 times the cost, their pricing is competitive enough and should win the projects. (price = total cost * 1.25) ShopOnline operates in four functions: website development, data entry for products, data collection on customer orders, and security maintenance. The total cost for 2020 is $685,240 and costs for each function are listed below. Functions Website development Data entry - products Data Collection - orders Security maintenance Costs in 2020 $300,000.00 $218,400.00 $51,840.00 $115,000.00 The cost of each function is driven by different activities. The cost drivers and consumptions for 2020 are listed below. Function/Activities Website development Data entry - products Data collection - orders Security maintenance Cost drivers Engineer Hours Number of products Number of online orders processed Engineer Hours Consumption in 2020 6,000 7,280 17,280 2,300 4. A family member heard that ShopOnline will start to take new business and had asked you to develop a new website that will take 200 hours. He told you that he could only afford $8,000 and cannot find anyone willing to do the job at this price. When you told him that the cost is more than $8,000 he asked to see your costing model. Looking at your pricing structure he asked you to reallocate a lower amount to the website development pool, so the hourly rate would be lower, and the quote will have a much lower cost. This order may ultimately result in a profit if you make the change. Answer the below questions: a. What would you do in this case? b. What have you considered to draw your conclusion in question a? (hint: consider the stakeholders, professional ethics, and your responsibilities as a manager) 5. Based on the current pricing model there is an expectation that profits will be 25% of sales. What do you suspect would happen to the profit % if sales for 2021 were to be $800,000 and what would happen to the profit % if sales were as high as $1,000,000? Explain the reason for your analysis
