Assume that we have started the IT Training institute and we are planning to set a price of 800$ per student for one course. Here we have various fixed costs like Rent, salary etc. We also have variable costs like material cost and some semi variable costs like faculty cost.
Assume our break-even point is 15 students. Now in this case Director is saying that the price given above is perfect and we will earn handsome profit in 1st year.
But as a consultant, at the time of evaluation we have to take care of below points,
– The price must be compared with competitors and our price should be aligned with our strategy.
– We can have the handsome profit but what if the minimum students have not enrolled in our courses.
– What to do if we have fewer students? Cancel the course? If we cancel then what will be paid to faculty?
– How much profit we can get with maximum capacity of students. Should we take a risk?
– What are the advantages and disadvantages of our current strategy and what other options do we have?