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Name: Affan Ahmed Course: ACN 202 ID: 1821868 Section: 07

The document contains the details of a student named Affan Ahmed doing course ACN 202. It discusses various distribution strategies for a jewelry company called Foxy including trade shows and online sales. It asks several questions analyzing costs, revenues, contribution margins, break-even points and profitability of the two distribution channels. Based on the analysis, trade shows are projected to be more profitable for Foxy in 2015 compared to online sales, though both channels are expected to make a loss. The student recommends that Foxy chooses the trade show distribution option over online sales based on it having lower expected losses.

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Affan Ahmed
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111 views11 pages

Name: Affan Ahmed Course: ACN 202 ID: 1821868 Section: 07

The document contains the details of a student named Affan Ahmed doing course ACN 202. It discusses various distribution strategies for a jewelry company called Foxy including trade shows and online sales. It asks several questions analyzing costs, revenues, contribution margins, break-even points and profitability of the two distribution channels. Based on the analysis, trade shows are projected to be more profitable for Foxy in 2015 compared to online sales, though both channels are expected to make a loss. The student recommends that Foxy chooses the trade show distribution option over online sales based on it having lower expected losses.

Uploaded by

Affan Ahmed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 11

Name : Affan Ahmed

Course : ACN 202


ID: 1821868
Section : 07
Question no 1 :Assess each distribution strategy from a qualitative point of view.

The trade shows allowed for direct conversation with business buyers
Their expansion into the united states in which they sold directly to customers
would lead to the us sales accounting 70% of Foxys total sale
. Online sales requires a significant change in the company’s operations they no
longer sold bulk to retailer but sold directly to the end consumer
The move to online sales allowed foxy to finally sell to consumers outside the USA
and Canada
 The online sales market would require lots of advertising to take place via social
media, convincing the everyday consumer to purchase foxys jewelry is a very different
task than selling retailers.
Question number 2 : Identify all costs, other than variable costs, for the trade show
distribution strategy. Categorise these costs as investments or fixed costs (per trade show and
for FY 2014/15)

•Preparing a booth $ 4000 is a investment because after making the booth it can be
used in 10 shows .
•Registration cost $3000 is a fixed cost because it is said that in the question that each
and every registration of every show is required the same amount
•Shipping cost for the booth is a fixed cost because it is the same amount for each and
every shipment.
•Travel cost for 2 $ 1000 each is a fixed cost because it is a approximate cost for both of
the partners in every tour.
•Promotional materials and product samples $ 2800 is a fixed cost because in every
trade show is almost the same.
Question number 3 :If the partners decide not to attend the trade shows, what is the
total available increased amount for the online marketing campaign for FY 2014/15?

The question asked if the owners decide not to go to the trade show how
much money will they save for the marketing purpose of the online sector so
the expenses that they will make in the trade show is the amount that they
will save.
Amount
10 shows $3000 per registration per show $30000

Shipping booth $1500 per show $15000


Travel expenses $2000 per show $1000 for each partner $20000
Promotional materials $2800 per show $28000
Depreciation $133 per show $1333.3
$94333.3
Question number 4 :Do the variable costs for both products (necklaces
and pairs of earrings) differ between trade shows and online sales? By
how much does it differ, if it does differ?

As the shipping cost is not counted as the variable cost so


the price of the earrings and necklaces is the only
variable cost.

Amount
Necklaces $8.05
Pairs of earrings $5.5
Question number 5 :Calculate the variable costs per order incurred at a
trade show and the variable cost per order in online order .

In trade there will be a sale of 25 earrings of $8.05 each and about


12 necklaces of $5.5 each.
In online there will be a sale of 2 earrings of $8.05 each and about
1 necklace of $5.5 each
So the variable cost per order is :

Trade :
(25 necklaces + 12 earrings ) per order = { (25*8.05)+(12*5.5)=267.25}
Online :
(2 necklaces + 1 earrings ) per order = { (2*8.05)+(1*5.5) = 21.6}
Question number 6 :For each distribution strategy, calculate the
unit contribution and the contribution margin rate for each of the
two product lines (necklaces and pairs of earrings). What is the
weighted average contribution margin rate for an order at the trade
show and online order?

The equations that are used are:

Trade show :
Necklaces Earrings
Unit contribution (17- 8.05= 8.95) (12- 5.5 = 6.5)
(Selling price – variable cost)

Equation
Unit contribution by order {(25*8.95) + (12*6.5)} = 301.75

Necklace Earrings
Contribution margin rate (8.95/17= 52.65%) (6.5/12 = 54.17%)
(unit contribution/selling price)

Equation
Weighted average contribution margin rate {25/(37*52.65%)}+{12/(37*54.17%} = 53.14%
Online :
Necklaces Earrings
Unit contribution (34-8.05 = 25.95) (24-5.5 = 18.5)
(selling price- variable cost )

Equation
Unit contribution by order {(2*25.95)+(1*18.5)} = 70.4

Necklaces Earrings
Contribution margin rate (25.95/34)= 76.32% (18.5/24) = 77.08%
(unit contribution/selling price)

Equation
Weighted average contribution margin rate {2/(3*76.32%)}+{1/(3*77.08%)} = 76.57%
Question number 7 :Calculate Foxy’s Break-even point for each distribution
strategy.

The equations that are used and the equations are given below:

By trade show By online


Break even in sales dollars (94300/53.14%) = (93000/76.57%)=
(total fixed cost/weighted average margin 177445.8498 121452.2027
ratio)
Break even in orders (94300/301.75)= 312.51 (93000/70.4) = 1321.02
(Total fixed cost/unit contribution )
Question number 8 :Which distribution channel is projected to be more profitable in 2015?

The maths that are required to do the comparison is given below:

For Online:

High 5 % Low 3%
Total revenue ( 4429*22) 407429 244457.143
Total fixed variable cost 95666.4 57394.2857
4429*{(2*8.05)+(1*5.5)
Total fixed cost 93000 93000
Profit (Loss) 218762 94063

For Trade:

High 45 Low 20
Revenue per order 45 20
Unit revenue 569 569
Total revenue per show*10 25605 11380
Reorder 256050 113800
(-) Total variable cost 256050 113800
(-) Total fixed cost 240525 106900
Profit (Loss) 94333 94333
177242 26367

Though both of them are making loss but still trade makes less loss.
Question number 9 : As per Ger and Chemel, perform relevant analysis
and give a final decision. Support your decision with relevant
justifications.

Ger and Chmel I choose the trade option because this


analysis from above we can see that both is loss but
the trade is less loss than the online market option.so
we can say that the trade option is more better than
this online option we should go for this trade option to
expand this business.

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