Case Brief The founders of a jewellery company, Foxy Originals, needed to decide how best to increase sales. The company sold its jewellery both online and through retailers across the United States and Canada. The founding partners had to decide whether they should focus more of their time and money on developing online sales or continue attending trade shows that attracted additional retail locations for Foxy Originals' products. Both partners wanted to ensure that they achieved a healthy work-life balance. Learning Objective 1. To identify costs relevant to the decision and categorize them as investments, fixed costs, or variable costs. 2. To calculate unit contribution, contribution-margin ratio, and weighted- average-contribution-margin rates. 3. To perform a breakeven analysis and interpret its meaning using relevant parameters (i.e., the potential number of orders trade shows/online sales could generate). 4. To project the profitability of each distribution strategy. 5. To perform a sensitivity analysis on the expected sales level for each distribution strategy. Assignment Questions 1. Assess each distribution strategy from a qualitative point of view. 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) Page 1 of 2 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? 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? 5. Calculate the variable costs per order incurred at a trade show and the variable cost per order in online order. 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? 7. Calculate Foxy's Break-even point for each distribution strategy. 8. Which distribution channel is projected to be more profitable in 2015? 9. As per Ger and Chemel, perform relevant analysis and give a final decision. Support your decision with relevant justifications