Rhiannon started a new business last year making and selling rings. She buys stones which have been cleaned and coated for $3 apiece (on average). Other materials cost about $2 per ring. Rhiannon sells her rings online for $15 each and $20 each in person. She realizes that her customers could shop online to save money, but they would still need to pay for shipping (flat rate of $10 per order which is about $2 higher than her typical shipping cost). She doesnt market all her creations online, keeping the best pieces as treats for regular customers. In her first year, Rhiannon sold 1,100 rings of which 60% were in person- she estimates that online shoppers buy three rings per order on average, while in-person shoppers buy two per visit. She is looking for feedback on this sales strategy. Also, Rhiannon has heard of cost-volume-profit analysis and she is wondering how things look for her currently (and maybe in the future) from a break-even and margin of safety standpoint.

Analyze Rhiannons business and advise her on the matters raised in the case. Make sure your recommendations are well supported by quantitative and qualitative analysis which ties to the case facts.