Need help with questions 1 and 2 Case D-13: Wellness Getaways, Inc.: The Challenge of Setting a PriceWellness Getaways, Inc. packages cruises to Caribbeanislands such as Martinique and the Bahamas. Like con-ventional cruises, the packages are designed to be fun.But the cruise is structured to help participants becomehealthier by breaking old habits, such as smoking or over-eating. The Miami-based firm was conceived by SusanIsom, 30, a self-styled innovator and entrepreneur. Priorto this venture, she had spent several years in NorthCarolina promoting a behavior-modification clinic.Isom determined that many people were very concernedabout developing good health habits, yet they seemed unableto break away from their old habits because of the pressuresof day-to-day living. She reasoned that they might have achance for much greater success in a pleasant and sociallysupportive environment, where good health habits were fos-tered. Accordingly, she established Wellness Getaways, Inc.,hired 10 consulting psychologists and health specialists todevelop a program, and chartered a ship. Seven of Isom'sbusiness associates contributed an initial capital outlay total-ing more than $600,000. Of this amount, $130,000 went forthe initial advertising budget, $20,000 for other administra-tive expenses, and $440,000 for the ship rental and crew.Mary Porter, an overweight Denver schoolteacher, hassigned up to sail on a 10-day cruise to Nassau, departingDecember 19. She and her shipmates will be paying anaverage of $3,000 for the voyage. The most desirablestaterooms cost $4,400.Mary learned of the cruise by reading the travel sec-tion of her Sunday newspaper on October 16. On thatdate, the Pittsford and LaRue Advertising Agency placedpromotional notices for the cruise in several major metro-politan newspapers. Mary was fascinated by the idea ofcombining therapy sessions with swimming, movies, andan elegant atmosphere.Pittsford and LaRue account executive Carolyn Sukhanoriginally estimated that 300 people would sign up forthe cruise after reading the October 16 ads. But as ofNovember 14, only 200 had done so. Isom faced an im-portant decision."Here's the situation as I see it," explained a disturbedIsom. "We've already paid out more than half a millionto get this cruise rolling. It's going to cost us roughly$400 per passenger for the 10-day cruise, mostly forfood. Pittsford and LaRue predicted that 300 peoplewould respond to the advertising campaign, but we'veonly got 200."Isom continued, "I see three basic options: (1) we can-cel the cruise and take our losses; (2) we run the cruisewith the 200 and a few more that will trickle in over thenext month; or (3) we shell out some more money onadvertising and hope that we can pull in more people."My preference is that we try to recruit more passen-gers. There are simply too many empty rooms on thatship. Each one costs us a bundle."At this point, Carolyn Sukhan said: "I've worked outtwo possible advertising campaigns for the November 20papers. The first, the limited campaign will cost $12,000.I estimate that it will bring in 20 passengers. The moreambitious campaign, which I personally recommend,would cost $30,000. I believe this campaign will bring ina minimum of 40 passengers.""I realize that our first attempt was somewhat disap-pointing. But we're dealing here with a new concept, anda follow-up ad might work with many newspaper readerswho were curious and interested when they read our firstnotice.""One thing is absolutely certain," Sukhan emphasized."We must act immediately if there's any hope of gettingmore people on board. The deadline for the Sunday pa-pers is in less than 48 hours. And if our ads don't appearby this weekend, you can forget it. No one signs up inearly December for a December 18 sailing date."Isom interrupted, shaking her head. "I just don't knowwhat to say. I've looked over Carolyn's proposals, andthey're excellent. Absolutely first-rate. But our problem,to be blunt, is money. Our funds are tight, and our inves-tors are already nervous. I get more calls each day askingme where the 300 passengers are. It won't be easy tosqueeze another $12,000 out of these people. And to askthem for $30,000 well, I just don't know how we'regoing to be able to justify it."Questions1. What is the minimum number of passengers thatWellness Getaways must sign up by November 20 tobreak even with the cruise? (Show your calculations.)2. Should Wellness Getaways go ahead with thecruise, since 200 passengers have signed up as ofNovember 14?3. Would it be worthwhile for Wellness Getaways to spendeither $12,000 or $30,000 for advertising on November20? If so, which figure would you recommend?4. How realistic are Carolyn Sukhan's estimates of 20more passengers for the $12,000 advertising campaignand 40 more passengers for the $30,000 campaign?5. Should Wellness Getaways consider cutting its pricesfor this maiden voyage?

Question

Need help with questions 1 and 2 Case D-13: Wellness Getaways, Inc.: The Challenge of Setting a PriceWellness Getaways, Inc. packages cruises to Caribbeanislands such as Martinique and the Bahamas. Like con-ventional cruises, the packages are designed to be fun.But the cruise is structured to help participants becomehealthier by breaking old habits, such as smoking or over-eating. The Miami-based firm was conceived by SusanIsom, 30, a self-styled innovator and entrepreneur. Priorto this venture, she had spent several years in NorthCarolina promoting a behavior-modification clinic.Isom determined that many people were very concernedabout developing good health habits, yet they seemed unableto break away from their old habits because of the pressuresof day-to-day living. She reasoned that they might have achance for much greater success in a pleasant and sociallysupportive environment, where good health habits were fos-tered. Accordingly, she established Wellness Getaways, Inc.,hired 10 consulting psychologists and health specialists todevelop a program, and chartered a ship. Seven of Isom'sbusiness associates contributed an initial capital outlay total-ing more than $600,000. Of this amount, $130,000 went forthe initial advertising budget, $20,000 for other administra-tive expenses, and $440,000 for the ship rental and crew.Mary Porter, an overweight Denver schoolteacher, hassigned up to sail on a 10-day cruise to Nassau, departingDecember 19. She and her shipmates will be paying anaverage of $3,000 for the voyage. The most desirablestaterooms cost $4,400.Mary learned of the cruise by reading the travel sec-tion of her Sunday newspaper on October 16. On thatdate, the Pittsford and LaRue Advertising Agency placedpromotional notices for the cruise in several major metro-politan newspapers. Mary was fascinated by the idea ofcombining therapy sessions with swimming, movies, andan elegant atmosphere.Pittsford and LaRue account executive Carolyn Sukhanoriginally estimated that 300 people would sign up forthe cruise after reading the October 16 ads. But as ofNovember 14, only 200 had done so. Isom faced an im-portant decision.&#34;Here's the situation as I see it,&#34; explained a disturbedIsom. &#34;We've already paid out more than half a millionto get this cruise rolling. It's going to cost us roughly$400 per passenger for the 10-day cruise, mostly forfood. Pittsford and LaRue predicted that 300 peoplewould respond to the advertising campaign, but we'veonly got 200.&#34;Isom continued, &#34;I see three basic options: (1) we can-cel the cruise and take our losses; (2) we run the cruisewith the 200 and a few more that will trickle in over thenext month; or (3) we shell out some more money onadvertising and hope that we can pull in more people.&#34;My preference is that we try to recruit more passen-gers. There are simply too many empty rooms on thatship. Each one costs us a bundle.&#34;At this point, Carolyn Sukhan said: &#34;I've worked outtwo possible advertising campaigns for the November 20papers. The first, the limited campaign will cost $12,000.I estimate that it will bring in 20 passengers. The moreambitious campaign, which I personally recommend,would cost $30,000. I believe this campaign will bring ina minimum of 40 passengers.&#34;&#34;I realize that our first attempt was somewhat disap-pointing. But we're dealing here with a new concept, anda follow-up ad might work with many newspaper readerswho were curious and interested when they read our firstnotice.&#34;&#34;One thing is absolutely certain,&#34; Sukhan emphasized.&#34;We must act immediately if there's any hope of gettingmore people on board. The deadline for the Sunday pa-pers is in less than 48 hours. And if our ads don't appearby this weekend, you can forget it. No one signs up inearly December for a December 18 sailing date.&#34;Isom interrupted, shaking her head. &#34;I just don't knowwhat to say. I've looked over Carolyn's proposals, andthey're excellent. Absolutely first-rate. But our problem,to be blunt, is money. Our funds are tight, and our inves-tors are already nervous. I get more calls each day askingme where the 300 passengers are. It won't be easy tosqueeze another $12,000 out of these people. And to askthem for $30,000 well, I just don't know how we'regoing to be able to justify it.&#34;Questions1. What is the minimum number of passengers thatWellness Getaways must sign up by November 20 tobreak even with the cruise? (Show your calculations.)2. Should Wellness Getaways go ahead with thecruise, since 200 passengers have signed up as ofNovember 14?3. Would it be worthwhile for Wellness Getaways to spendeither $12,000 or $30,000 for advertising on November20? If so, which figure would you recommend?4. How realistic are Carolyn Sukhan's estimates of 20more passengers for the $12,000 advertising campaignand 40 more passengers for the $30,000 campaign?5. Should Wellness Getaways consider cutting its pricesfor this maiden voyage?

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