Case: Monicas Designer Handbags: Creative Marketing Decision-Making

QUESTIONS FOR STUDENTS TO ANSWER

1. What is Monicas unit contribution margin (in dollars per handbag) after direct manufacturing and shipping costs?
2. What is Monicas unit contribution margin (in dollars per handbag) on the Grand*Mart initial deal, using their suggested wholesale price of $20, after incremental direct expenses? (Diagram as Exhibit 2 - Grand*Mart Discount Channel.)
3. Should Monica propose the Grand*Mart deal as suggested? Or should she take a pass and stay exclusively with the independent retailer channel? Or should she renegotiate the initial 2,000 bag deal for the first quarter? Should she offer Grand*Mart an exclusive 10,000 deal for the second quarter?
4. What is the maximum wholesale price that Grand*Mart could be willing to pay Monica, given their probable retail price and typical margin requirements? If Monica decides to renegotiate the initial Grand*Mart deal as of the first quarter with volumes of 2,000 bags per month and incremental overhead of $25,000 per month, what best and final price should she propose that would be acceptable to both parties? What is the revised incremental profit impact?
5. If Monica decides to offer Grand*Mart an exclusive deal as of the second quarter at minimum volumes of 10,000 bags per month with overhead expenses of $75,000 per month, what best and final price should she propose that would be acceptable to both parties? What is the profit impact of this exclusive deal?