Quantitative Analysis : Trade Shows Essay

1943 WordsNov 11, 20168 Pages
Quantitative Analysis: Trade Shows Quantitatively, the trade shows distribution channel and the sales representatives distribution channel differ mainly in their cost structures; trade shows would make use of a high fixed costs-low variable costs structure while sales representatives would use the opposite. The high fixed cost of trade shows ($10,433.33 per show1) stems from the fact that Foxy’s owners have never before attended a trade show, so they would need to purchase everything necessary for the show for the first time (material samples, a booth, etc.). They also know for certain that if they take this route they will attend 10 shows in fiscal year 2005, so they can treat any expenses related to the shows themselves as fixed expenses for the year ($104,333.33). Since they don’t need to hire any extra employees to attend the shows, the only variable expenses they would end up being Foxy’s jewelry production cost, totalling $236.25 per order2. This kind of cost structure has important implications for the profit that Foxy would earn as a result. Each order placed will have a much higher contribution margin ($332.75)3 because of the minimized variable cost, which means that after the company is able to break even, more of the sales revenue will be retained as profit than would be in the sales representative method. However, this advantage comes with the tradeoff of a much higher breakeven point (314 orders)4. The high fixed-cost structure also has important secondary
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