Cognitive Conflict Task Version of Safe Night Out Episode 1

Learning Objectives

A successful learner will be able to:

Skills required:

1

Use product, price, cost and market demand, and decide if the product is feasible.

1.   Identify variable and fixed costs.

2.   Select relevant information.

3.   Analyze feasibility of product using price, market volume, minimum earnings, and fixed and variable costs.

2

Decide how each element of cost and price affects product profitability.

1.  Calculate profit and contribution margin and contrast the two.

3

Explain how sales volume and cost structure assumptions would likely affect profitability per unit.

1.   Analyze profitability implications of changing assumptions and forecasts.

2.   Report results of analysis to internal and external users.

4

Create a spreadsheet (in good form) to compute and update:

1.       The profit per unit based on a variety of sales volume estimates.

2.       Monthly earnings based on a variety of sales volume estimates.

3.       Breakeven sales and units given target profit estimates.

 

1.   Create models using technology tools.

2.   Create schedules to highlight observations and facilitate reader comprehension of conclusions.

5

Identify the important assumptions that drive the conclusion about product feasibility.

1.   Analyze profitability implications of changing assumptions and forecasts.

2.   Explain how fixed costs and sales volume assumptions are important to per unit profit calculations.

6

Write a professional memo (brief, clear, well-organized, without jargon) to a client which:

1.       Summarizes the conclusions about product feasibility,

2.       Explains how long it will take to reach the goals, and

3.       Explains how changing sales volume estimates impacts both product profitability and length of time to reach the goals.

1.   Report results of analysis to internal and external users.

2.   Create schedules to highlight observations and facilitate reader comprehension of conclusions.
 

 

Business Dilemma

Do you know where your car is?

Do you know how it’s being driven?

How it all started...

 

Kris and Sandy, roommates at Le Grande State University, overheard their parents' friends talk about how they wished there was some way to let their teenage children, especially the new drivers among them, have access to family cars, but still have some assurance that their offspring were driving responsibly. By “responsibly,” the parents meant that the drivers stayed within the speed limits and within the permitted geographical areas.

 

Kris had an idea: “You could create a tracking device that would be installed in the cars that would record the route and speed of the vehicle for 24 hours. The car knows how fast it's going, and the location could be obtained from a global positioning system (GPS). With just a little bit of programming, you could record the speed and location on a writable CD-ROM, which moms and dads could pop in their computer to see how their offspring were behaving (or misbehaving!)”

 

Sandy: “I hope you're not serious about this project--remember that last programming project you had--remember how long it took!”

 

Kris: “Yeah, well, I've learned better programming techniques since then.”

 

Sandy: “Just think of the possibilities--the typical ‘youthful driver’ premium is $2,000 over the family rate per year. The automobile insurers that now offer 10 percent  discounts for teenage  ‘good students’ might offer discounts for student-driven cars that had such a tracking device. Wonder what this kind of assurance would be worth to parents?”

 

Sandy and Kris couldn't quit thinking about the idea--in fact, they were late to classes the next morning because they stayed up most of the night thinking of the possibilities. Before the night was over, they'd thought through the materials that would be needed (GPS tracker, serial cable, CD-ROM disk), the programming that would be required (Kris would do it with Sandy testing it), and how they'd sell it (on eBay on a commission basis). Here are the details [see below] they supplied.

 

A few days later...

 

Coming up for a reality check, Kris and Sandy realized they needed help figuring out whether their idea, which they were now calling Safe Night Out (SNO for short), was feasible. They knew you were taking an accounting course so they elected you to help them. (They'd helped you out of several jams so how could you refuse!) They want to know what to expect. Specifically, they want to know:

 

  1. How much profit would each SNO generate?
  2. If Kris and Sandy wanted to earn enough to pay for school tuition, how many would they have to sell?
  3. If they achieve the estimated sales each night on eBay, how much profit would they make in a month?
  4. If they achieve the estimated sales each night on eBay, how long would it take them to earn Le Grande State tuition?

 

Requirements

Your assignment is to develop a spreadsheet that answers the entrepreneurs’ questions. Include separate sheets for input, calculations, reports, and the advice memo. Make cells in the calculation sheet reference cells in the input sheet so that the calculation sheet updates with changes in the input sheet. Use the report sheet to summarize the most important findings for the client. In a one-page advice memo (prepared with a word processor), advise the entrepreneurs about the feasibility of their product. Import the memo into a separate sheet.

 

Details

 
Item

Estimated Cost
Materials

 

 

GPS tracker

$150

 

Serial cable

$5

 

CD-ROM disk

$1
Sales assumptions

 

 

eBay selling costs

$2.50 per item plus 5% of selling price

 

Selling price

$200

 

Estimated number of SNOs that would be sold each night

4
Other information

 

 

Tuition at LeGrande State University, per student

$6,000

 

Source: Springer, C. W., and A. F. Borthick. 2004. Business simulation to stage critical thinking in introductory accounting: Rationale, design and implementation. Issues in Accounting Education 19 (2): 277-303. article pdf