Case 4: Max the Final Exam Corporation (MTF) Due Date: Saturday December 5th (5p

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Case 4: Max the Final Exam Corporation (MTF)

Due Date: Saturday December 5th (5p.m. Via Canvas)

Submission Type: Group 

Max the Final Corporation has total sales of $2,000,000 annually which are derived from two large customer groups - Exam Pleaser (EP) customers and Exam Maxer customers.  

The EP market is at the lower end of the customer market - a less discerning customer that simply wants to be pleased with exam results. Market research has indicated that "pleased" means passing with a "good" mark. The EM market, on the other hand, is a more discerning customer that wants to "max out" their exam results. The EM customers are willing to pay for performance.  

Max the Final Corp. and Big Picture Research Company Data

Exam Pleaser Exam Maxer

MTF's Current Unit Price (Excluding Delivery Charges) $95.00 $116.67

Potential Maximum Price Point (1) (2) (3) $100.00 $119.00

(1) Taken from Big Picture's research report "Getting More Money from Your Customers and Making Them Feel Good About it".

(2) The report's maximum price is the total of selling price and delivery charges.

(3) Big Picture's research found that prices, including delivery surcharges, above these levels result in a loss of customers.

The exam preparation industry has very few competitors, only 2-3 different companies sell goods and services into the market place.  

Currently, MTF assesses a delivery surcharge only to the EP market. The surcharge of $3.95 per delivery was set a number of years ago and has not been reviewed since then. MTF has not historically charged a delivery fee to the EM market. However, a review of competitor's web sites shows that all of MTF's competitors are charging delivery fees to both the EP and EM markets.  

MTF's most recent financial results are as follows:

Recently, management updated its assumptions regarding customer delivery activities, and related costs, determining the following:

The Tasks at Hand:

a. Management would like to know what are the true costs of delivery, on a per unit basis, to each of these customer groups.

b. On a per-unit basis, what would be the recommended increase in delivery surcharges to the EP market? 

c. On a per-unit basis, what would be the recommended increase in delivery surcharges to the EM market?