Foxy Original
6. Calculate the variable costs per order received at a trade show and the variable costs per order received through a sales rep?
For each order received at a trade show, the variable cost can be determined as follow: Manufacturing cost for necklace | $8.05 | | Number of necklaces | 25 | | | Sub-total | $201.25 | Manufacturing cost for a pair of earring | $5.50 | | Number of pairs of earrings | 12 | | | Sub-total | $66.00 | Shipping cost | | $15 | | Total variable cost | $282.25 |
Since sales representative would receive a 15% commission on all sales, the compensation cost is calculated as follow Number of necklaces per order | 25 | | Price per necklace | | $17 | Number of pairs of earrings per order | 12 | | Price per pair of earrings | | $12 | Sales revenue per order | | $569 | | | | Compensation cost | 15% | $85.35 |
For each order received through a sales representative, the variable cost can be determined as follow: Manufacturing cost for necklace | $8.05 | | Number of necklaces | 25 | $201.25 | | Sub-total cost | | Manufacturing cost for a pair of earring | $5.50 | | Number of pairs of earrings | 12 | $66.00 | | Sub-total cost | | Compensation cost | | $85.35 | | Total variable cost | $352.60 |
7. For each distribution strategy, calculate the unit contribution and contribution margin ratio for each of the two product lines (necklaces and earrings). What is the weighted average contribution margin for an order at a trade show and an order with a sales rep?
For trade show distribution strategy, the unit contribution and contribution ratio for each of the product lines can be determined as below: | Necklace | Pair of earrings | Manufacturing cost | $8.05 | $5.50 | Shipping cost per item | $0.41 | $0.41 | | | | Variable cost per unit | $8.46 | $5.91 | Selling price | $17 | $12 | | | | Unit contribution | $8.54 | $6.09 |
For each order received at a trade show, the variable cost can be determined as follow: Manufacturing cost for necklace | $8.05 | | Number of necklaces | 25 | | | Sub-total | $201.25 | Manufacturing cost for a pair of earring | $5.50 | | Number of pairs of earrings | 12 | | | Sub-total | $66.00 | Shipping cost | | $15 | | Total variable cost | $282.25 |
Since sales representative would receive a 15% commission on all sales, the compensation cost is calculated as follow Number of necklaces per order | 25 | | Price per necklace | | $17 | Number of pairs of earrings per order | 12 | | Price per pair of earrings | | $12 | Sales revenue per order | | $569 | | | | Compensation cost | 15% | $85.35 |
For each order received through a sales representative, the variable cost can be determined as follow: Manufacturing cost for necklace | $8.05 | | Number of necklaces | 25 | $201.25 | | Sub-total cost | | Manufacturing cost for a pair of earring | $5.50 | | Number of pairs of earrings | 12 | $66.00 | | Sub-total cost | | Compensation cost | | $85.35 | | Total variable cost | $352.60 |
7. For each distribution strategy, calculate the unit contribution and contribution margin ratio for each of the two product lines (necklaces and earrings). What is the weighted average contribution margin for an order at a trade show and an order with a sales rep?
For trade show distribution strategy, the unit contribution and contribution ratio for each of the product lines can be determined as below: | Necklace | Pair of earrings | Manufacturing cost | $8.05 | $5.50 | Shipping cost per item | $0.41 | $0.41 | | | | Variable cost per unit | $8.46 | $5.91 | Selling price | $17 | $12 | | | | Unit contribution | $8.54 | $6.09 |