Professional Documents
Culture Documents
Subm
Name : Taieeb Khan
Assignme
itted
ID : 2021559
ACN-nt
by:
202
Course
Ms. Nimat Zarin
Adjunct Lecturer
&
Department of Accounting, School of Business
Faculty
Independent University, Bangladesh
Contents
Question-1...................................................................................................................................................3
Answer-1.................................................................................................................................................3
Question-2...................................................................................................................................................4
Answer-2.................................................................................................................................................4
Question-3...................................................................................................................................................6
Answer-3.................................................................................................................................................6
Question-4...................................................................................................................................................7
Answer-4.................................................................................................................................................7
Question-5...................................................................................................................................................9
Answer-5.................................................................................................................................................9
Question-6.................................................................................................................................................10
Answer-6...............................................................................................................................................10
Question-7.................................................................................................................................................14
Answer-7...............................................................................................................................................14
Question-8.................................................................................................................................................17
Answer-8...............................................................................................................................................17
Question-9.................................................................................................................................................18
Answer-9...............................................................................................................................................18
Question-1: Assess each distribution strategy from a qualitative point of view.
Answer-1: Well, in the case study, two distribution strategy has been portrayed. One in
attending the trade show, and another is selling online.
Initially, their journey has started when they were college and they used to sale in Canada by
attending trade shows. After that, they expand the business into United States, and they were
received comparatively more sales on US. So, they used to attend the trade shows to receive
the maximum number of buyers. Now, in the case, it is mentioned that they directly sale to
the boutique owners as well as to the retail shop owners who purchases it form Ger and
Chemel. Now, the issue is that their life consists of their family and they use to manage the
work-life balance. That is why they have planned to do the selling in online due to maximum
people are connected through online.
So, this online selling requires mass online advertising, and the good portion is that they can
sell the product at retail prices which is upper than wholesale price. However, the promotion
costs a bit higher. So, they are in the confusion in which distribution strategy, they should
follow.
Question-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)
The investment has taken place for the booth cost which is $4000 for 30 shows.
= 133.33
Now, let’s find out the fixed costs of booth for trade shows.
Fixed Cost (Trade Shows)
Per Show 10 Times/ Year
Booth Investment $133.33 1333.33
Booth Shipping $1500 $15000
Travel Expense $2000 $20000
Promotional Expense $2800 $28000
Registration Fee $3000 $30,000
Total Fixed Costs $9433.33 $94333.33
So, here is the hitch. The who amount of fixed cost for offline trade shows will be the whole
fixed cost for online. Because these two are the alternates.
So, online cost is basically the per click cost which is $1.05. So, we need to find out the total
clicks per year.
So, the fixed cost for online and the offline is same which is $94333.33.
Question-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?
Answer-3: Now, if the partners decide not to attend trade shows, then the total available
increased amount for the online marketing campaign for FY2014/15 is $94,333.33.
Reasoning:
These two can be visualized as alternate. So, if they do not attend, then they can save these
amounts of money which will be used for the marketing campaign for online.
Question-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?
Answer-4: So, we need to find out the variable costs for both trade shows and Online. Let
us explore.
Trade Shows:
There is a line mentioned about the order volume which is from 20 to 45. Let us count the
first one is 21, and the repeated two sales will be 34 and 44.
*Orders
Earrings (5.50* 12) * 1386 2244 2904
Orders
Total Variable Cost 5612.25 9086.5 11759
Total Variable Cost 56122.5 9086.5 117590
(10 Shows)
Answer-5: So, we need to find out the Variable cost/Order for both trade shows and online
order.
Online:
Trade Show:
Answer-6: First, we need to calculate the unit contribution and contribution margin.
Before that, let us find out the sales.
On online, 2 Necklace and 1 Earring is the minimum order. As in online, the price is the
retail price that is why the price for Necklace is 34 and for Earring is 24
Sales Online
Order Volume 2695 3594 4492
Necklace 183,260 244,392 305456
(34*2) * Orders
Earrings (24.1) 64, 680 86,256 107,808
*Orders
Total Sales 247,940 330,648 413,264
(17.25)
Earrings (12.12) 3024 4896 6336
Total Sales 11949 19346 25036
Total Sales * 10 119490 193460 250360
Shows
Now, let us find out the Contribution Margin Per Unit for Both distribution Strategy:
CM/Unit (Trade
Shows)
Sales VC CM / Sales CMR P.
CM/Unit (Online)
Sales VC CM / Sales CMR P.CMR
Price Price
Necklace 34 8.05 25.95 34 0.76 0.67
Earrings 24 5.50 18.50 24 0.77 0.33
Now, as we have calculated the CM/Unit and the P. CMR, so let us calculate the WACM
(Weighted Average Contribution Margin)
Online
WACM/Unit WACM Rate/Per Unit
Trade
Shows
WACM Ratio/Order
(WACM Rate/Unit * Quantity)
Necklace (0.358*25) 8.95
Earrings (0.173*12) 2.076
So, both the WACM/ Unit and WACM Ratio for an Order has been illustrated on the upper
tables.
Question-7: Calculate Foxy’s Break-even point for each distribution strategy.
Answer-7: So, on this area, we need to calculate the Breakeven Point for each distribution
strategy.
BE=
= 94333.33/ {(119490-59272.5)}/21}
= 94333.33/ (60217.5/20)
= 94333.33/3010.875
=31.33
For Online:
BE:
= 94333.33/ {(247940-79772)}/21}
= 94333.33/ (168168/2695)
= 94333.33/62.4
=1511.75
So, the result can be pointed that the contribution margin is much higher for trade shows
which results in a much smaller break-even point. Online sales costs higher variable cost
which is why the sales units is 1511.75.
So, let us find out the income statement for these two segments of strategy.
So, the Income statement for two sections has been illustrated on the upper tables.
Question-8: Which distribution channel is projected to be more profitable in
2015?
Answer-8: So, to find out which strategy is more profitable, then we should look the
income statement which we have calculate on Q-7.
For each strategy, we have taken the sales volume, which is close to minimum, in middle
and the maximum one. That results in find the number for trade shows is 21, 34, 44 and for
the Online is 3%, 4%, 5%.
Now, for each order number, we have calculated the net income. So, based on that, we can
conclude the online sales is more profitable compared to trade shows sales. Now, if we look
the trade show income statement table, then the lowest closest sales volume results in
negative. So, that means, if we continue to trade shows, then the maximum sales volume we
should require to earn profit. Whereas, for even the lowest percentage of sales online, the
profit is there.
Another point is that the price online is the retail price however the company is earning
wholesale price in trade shows. So, it also contributed to the profit scenario.
So, these proofs justify the statement that the online one is more profitable.
Question-9: As per Ger and Chemel, perform relevant analysis and give a final
decision. Support your decision with relevant justifications.
Answer-9: So, as we already discussed the income statement, we have concluded that the
online one is better.
Still, if we look at the maximum volume both for trade shows and online, though on
maximum amount, profit is on both sectors. Still, we look at the number of profits, the even
on the maximum amount, the profit is higher in online sales.
The reasons behind this are online sales is not limited within a certain geographical area. So,
a percentage of profit comes from outside CA and USA residents.
Now, if I recommend some point, then it will contribute to justifying benefit cost analysis
which will lead to higher profit and lower cost in the long run.
1. Finding out strategies to reduce using CPC (Cost per click). The use of this in the
long run will negatively impact on the profit.
2. The company is running on two products. So, new products should be introduced by
analysis the international customer preferences so that more targets can be covered,
and the awareness will reach to more regions.
So, these suggestions, if properly implemented, will bring more awareness and profit in the
future.