KOLEJ UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ACCOUNTANCY, FINANCE AND BUSINESS

ACADEMIC YEAR 2020/2021

DECEMBER EXAMINATION

BBDT3193 PRICING STRATEGY

TUESDAY, 15 DECEMBER 2020 TIME: 9.00 AM – 12.00 NOON

(3 HOURS)

BACHELOR OF BUSINESS (HONOURS) IN MARKETING

Instructions to Candidates:

This paper is divided into TWO (2) sections:

SECTION A: Answer ONE (1) compulsory case study question. (40 marks)

SECTION B: Answer ALL THREE (3) questions. (60 marks)

● This is an open book final online assessment. You MUST answer the assessment questions on
your own without any assistance from other persons.
● You must submit your answers within the following time frame allowed for this online
assessment:
o The deadline for the submission of your answers is half an hour from the end time of this
online assessment.
● Penalty as below WILL BE IMPOSED on students who submit their answers late as follows:
o The final marks of this online assessment will be reduced by 10 marks for answer scripts
that are submitted within 30 minutes after the deadline for the submission of answers for
this online assessment.
o The final marks of this online assessment will be downgraded to zero (0) mark for any
answer scripts that are submitted after one hour from the end time of this online
assessment.
● Extenuation Mitigating Circumstance (EMC) encountered, if any, must be submitted to the
Faculty/Branch/Centre within 48 hours after the date of this online assessment. All EMC
applications must be supported with valid reasons and evidence. The UC EMC Guidelines
apply.

STUDENT’S DECLARATION OF ORIGINALITY

By submitting this online assessment, I declare that this submitted work is free from all forms of
plagiarism and for all intents and purposes is my own properly derived work. I understand that I have
to bear the consequences if I fail to do so.

Final Online Assessment Submission

Course Code:
Course Title:
Signature:
Name of Student:
Student ID:
Date:
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This question paper consists of 4 questions on 5 printed pages.
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BBDT3193 PRICING STRATEGY

SECTION A (40 marks)

Answer ONE (1) compulsory case study question.

Question 1

Malaysia: “Have you Breach the Law During MCO?”

A trader here is facing stern action for selling eggs at RM1 each at his business premises amidst the
Movement Control Order (MCO). Perak Domestic Trade and Consumerism Ministry director
Saifullizan Kamarul Zaman said a team of five enforcement officers conducted a check at the
premises on Friday after receiving complaints regarding the matter on the same day.

“There was a sign showing the price of eggs was RM1 each without stating the eggs’ grades and a
total of 114 eggs were on display,” he said in a statement today.

He said they issued a notice to the trader to provide information on the sale price of eggs at his
premises before April 16 and added that action could be taken for failure to do so. He said the trader
could also be investigated under Section 12 (1) of the Consumer Protection Act 1999 for misleading
the public by not stating the eggs’ grades.

The Malaysia Competition Commission (MyCC) today proposed financial penalties of RM283,600 on
26 ice manufacturers found to have come into an agreement with the objective of fixing, directly or
indirectly, the selling price of edible tube ice and block ice in Kuala Lumpur, Selangor and Putrajaya.

In determining the level of financial penalty, the MyCC took into account the seriousness of the
infringement, the duration of the infringement; aggravating factors such as not being cooperative
during investigation; and mitigating factors such as being cooperative during investigation. The
financial penalties on the individual ice manufacturers ranged from RM1,200 to RM106,000.

The ice manufacturers concerned have 30 days from the date the Proposed Decision is served to
submit written representations or indicate whether the parties wish to make oral representations before
the MyCC.

The MyCC first issued Interim Measures to the ice manufacturers beginning January 20, 2014,
following their announcement December 24, 2013, in a few local dailies, stating their plan to increase
the price of edible tube ice by 50 sen per bag and the price of block ice by RM2.50 per big block from
January 1, 2014.

Source: Adapted and modified from The Star, 2014, ‘MyCC fine 26 ice manufacturers RM 283,600’,
The Star, 20 February. Available at: https://www.thestar.com.my/business/business-
news/2014/02/20/mycc-fines-26-ice-manufacturers-rm283600 (Accessed at 28 October 2020) and
Bernama, 2020, ‘Ipoh trader in trouble for selling eggs at RM1 each’, New Strait Times, 11 April.
Available at: https://www.nst.com.my/news/nation/2020/04/583271/ipoh-trader-trouble-selling-eggs-
rm1-each (Accessed at 21 June 2020)

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This question paper consists of 4 questions on 5 printed pages.
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BBDT3193 PRICING STRATEGY

Question 1 (Continued)

Required:

(a) Based on the case above, you are required to explain the ethical constraints on pricing which
is practised by the company during the movement control order. Justify your answer with
relevant examples. (20 marks)

(b) Evaluate which Malaysian law are breached by the company during the movement control
order. Justify your answer with relevant examples. (20 marks)
[Total: 40 marks]

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This question paper consists of 4 questions on 5 printed pages.
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BBDT3193 PRICING STRATEGY

SECTION B (60 marks)

Answer all THREE (3) questions.

Question 2

ABC is a leading manufacturer of disposable rubber gloves. The demand of disposable rubber gloves
has been increased due to the outbreak of covid-19. The pandemic has increased the importance of
hygiene among individuals. The market landscape of disposable rubber gloves, which are fast turning
into retail commodities, is expected to be accelerated. As the marketing manager of ABC, you need to
beware of averaging the total variable cost to estimate the cost of a single unit. Your employees are
working 8 hours a day (8am - 5pm) by earning a regular pay of RM8 per hour and an overtime
payment of RM10 per hour. You have a total of 500 employees in helping you to manufacture
disposable rubber gloves. The material cost per disposable rubber gloves is RM 0.02. Therefore, you
are required to:

(a) Determine the total material cost per day, total labour cost per day, labour cost per disposable
rubber glove and units cost per disposable rubber glove if the units of disposable rubber
gloves produce per day is 180,000 units at regular working hour (8am - 5pm). (8 marks)

(b) Now, imagine that before the outbreak, they usually produce 180,000 units of disposable
glove per day at regular working hour (8am - 5pm). However, due to the outbreak of Covid-
19, they are required to produce additional 100,000 units per day. If your employees need
another 3 hours (8am - 5pm) to produce 100,000 units, calculate the:

i) Total material cost per day;

ii) Total labour cost per day;
iii) Total labour cost per disposable rubber glove; and
iv) Total units cost by manufacturing 280,000 disposable rubber glove per day. (12 marks)
[Total: 20 marks]

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This question paper consists of 4 questions on 5 printed pages.
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BBDT3193 PRICING STRATEGY

Question 3

Imagine that there are two companies (Company A and Company B) simultaneously developed
virtually identical face mask sterilizer with the UV-C LED effectively removes bacteria and harmful
substances on the mask. The moisture discharging feature keeps the mask fresh inside the packaging
as the inner surface of the masks are not overlapped. Both companies will release their face mask
sterilizer at the same time, and each has to set a price for the sterilizer without knowing the price set
by its competitor. Let’s assume both companies will charge either a high price or a low price for all
units (Table 1). At the high price, the companies’ units’ contribution margin is RM259/sterilizer; at
the low price, the companies’ units’ contribution margin is RM129/sterilizer. Therefore, possible
actions for company A and B are to price ‘High’ or ‘Low,’ and each company’s strategy is a plan to
charge one of these two prices. There are two segments of customers for the face mask sterilizer and
the maximum price each segment is willing to pay is very different (Table 1).

Table 1. Prices, margins, and segments for face mask sterilizer

Price Units contribution margin at that price Number in segment

High Rm 259 3,000,000
Low Rm 129 6,000,000

(a) Let’s assume that both companies charge the same price and both companies can always
manufacture a sufficient number of face mask sterilizer to satisfy any number of customers.
Determine the sales for companies. (5 marks)

(b) Assume that company A and company B were not competitors but instead were divisions of
one company that is a monopoly producer of this product. Determine which consumer market
they would target to gain more sales and profit. (3 marks)

(c) Now imagine if both companies are competing with each other, evaluate what should they
charge for their face mask sterilizer. (12 marks)
[Total: 20 marks]

Question 4

Explain what do you understand about game theory and discuss how game theory can be applied to
trade and competition. [Total: 20 marks]

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This question paper consists of 4 questions on 5 printed pages.