Foxy Originals - Expansion into the U.S. Market
(6 pages of text)
A successful Canadian jewelry manufacturer and distributor contemplates entering the U.S. market and how best to do it. Students are required to: 1) identify costs relevant to the decision and categorize them as either investments, fixed costs or variable costs; 2) calculate unit contribution, contribution-margin ratio and weighted-average-contribution-margin rates; 3) perform a breakeven analysis and interpret its meaning using relevant parameters; 4) project profitability of a chosen distribution strategy; and 5) perform sensitivity analysis with respect to the expected sales level. Students are required to understand and analyse the opportunities and risks associated with entering a new geographic market and combine their qualitative and quantitative analysis when deciding which distribution strategy to pursue.
This case is best taught in an introductory managerial accounting course. Students can use cost behavior, contribution and breakeven analysis as financial tools to aid in their decision-making.
United States, Medium, 2005
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