To determine the pros and cons, we conducted a SWOT analysis:
S(trengths) – Foxy Originals has saturated the Canadian market, which presents an opportunity for growth. The two owners have extensive experience in designing jewelry, having done so since they were in high school. They’re good at what they do and have had time to perfect their trade. They also have a firm grasp of who their target market is, so they are able to offer “fresh, fun, and funky” products at a reasonable price. With such a specific product (rather than just general jewelry), it creates a niche market that will generate loyal customers.
W(eaknesses) – …show more content…
Variable costs for sales representatives include commissions, which is 15% of sales.
6. Calculate the variable costs per order received at a trade show and the variable costs per order received through a sales representative.
The variable cost incurred at a trade show is $282.22. To get this we calculated the variable cost ratio at a trade show by dividing the difference between best- and worst- case scenario costs by the difference in revenue. Then, we multiplied this ratio by the revenue of one order to get the variable cost per order at the trade show.
Best Case Costs-Worst Case CostBest Case Revenue-Worst Case Renevue=384,358.33-207233.33512,100-227,600=141,125284,500
=0.496 or 49.6%
Revenue of one order*variable costs ratio=variable cost at trade show
The variable cost through a sales representative is $367.57. We calculated the variable cost ratio for sales representatives and then multiplied it by the revenue of one order.
290,192-201,968409,680-273,120=88,224136,560=0.646 or 64.6%
7. For each distribution strategy, calculate the unit contribution and contribution margin rate for each of the two product lines (necklaces and pairs of earrings). What is the weighted average contribution margin for an order at a trade show and an order with a sales representative?
Total revenue for one order = $569.00
Revenue for 25 necklaces @ $17.00 = $425.00
Revenue for 12