Has anyone analysed the Foxy Originals US expansion case?
This case is about whether the owners should choose to trade through trade shows or sales reps.
Trade Shows
10 potential trade shows for 2005 where foxy could showcase its products.
registrations for all needs to be complete by Nov 2004 at an average of $3000 a show.
A booth costing $4000 is chosen for the shows which could be used for approximately 30 shows. The booth would have to be shipped to each trade show at an average cost of $1500 a show. Plane tickets and travel costs average to $2000 a show and promotion materials would cost $2800 a show.
An average retailer order to foxy's would consist of 25 necklaces and 12 pairs of earrings. Retailers would purchase necklaces for $17 and earrings for $12 from Foxy, which they would then sell to their customers for $34 and $24 respectively.
Necklaces cost $8.05 to make each. Earrings cost $5.50. Shipping terms were FOB shipping point and cost an average of $15 an order. The partners of Foxy expected anywhere from 20 to 45 orders at each trade show. Historically 50% of retail buyers at trade shows would reorder product approximately two times a year.
Sales representatives
Sales reps would be compensated with a 15% commission on all sales. They would also receive $200 a month towards retal space in their jewellery showrooms, 2 sets of sample boards a year for a total cost of $2900 and catalogues and promotional materials averaging $600 a year. Foxy would hire a part-time bookkeeper to pay the sales representatives because calculating sales commissions would be time consuming and complicated. The bookkeeper's fee would be $40 an hour, and this person would be required for 48 hours a year.
Production costs and retailer order size were the same for this option as for the trade show option. The average sales representative would sell between 10 to 15 orders each month. The 10 to 15 orders included both new account sales and reorders from existing customers. If this option was chosen, Foxy would hire four sales reps.
Tasks:
1. identify costs relevant to the decision and categorise them as either investments, fixed costs, or variable costs.
2. calculate unit contribution, contribution margin ratio and weighted average contribution margin ratio
3. perform a Break-even analysis and interpret its meaning using relevant parameters.
4. project profitability of a chosen distribution strategy
5. perform sensitivity analysis with respect to the expected sales level.
Please could anyone help with any of this?
