Question

Business 101

AN OPPORTUNITY IN BRITISH COLUMBIA

Marian Daniels, a local manufacturer of women's apparel, recently attended a trade fair in Chicago. There, she displayed samples of her dresses and made contact with several potential customers. Among those who were favorably impressed with the quality of her work was a buyer for a major Canadian department store chain, headquartered in Vancouver.

Janet Leveque, the buyer, was eager to introduce the Daniels line into her stores, and thought that the dresses would do quite well selling at around $99.95 Canadian. Therefore, she spoke with Marian and offered to place a large order, if Daniels could meet certain conditions.

First, and most important, was price. Leveque insisted that she needed to obtain the dresses at a delivered price of $60 Canadian. Only at this price would Daniels be competitive with manufactures from Canada and elsewhere. Second, she was concerned with packaging. Since a large part of the department store's business was in Quebec, it was necessary that all tagging be done both in French and in English. Finally, she stressed that delivery must be timely. Since women's apparel was so seasonal in nature, late deliveries of product would naturally mean that customers went elsewhere to buy.

Marian thought the Canadian overture presented a tremendous opportunity for expanding sales. Therefore, she was very encouraging with the buyer, although Daniels declined to make a firm commitment. She agreed to take the idea back to her production team and call the buyer within a week with a firm answer. Leveque was amenable to this, and said that she would be anxiously awaiting Marian's call.

Once back at the office, Marian and her staff developed the following data on the proposed sale (all figures per piece):

Cost of Production:        $30.00

Freight to Vancouver:      1.50

Bilingual Tagging:              .50

Total Cost:                       $32.00

Research on the internet shows that the current exchange rate is $1.00 U.S. = $1.45 Canadian.

You offer to do a full analysis of the question and present a report to Marian. The report should include the following.

           1. Gross Profit on Sale for each piece under current conditions.

           2. The impact, if any, of changes in the exchange rate.

           3. Any other factors which might be relevant to the financial success of the venture.

           4. Finally, suggest what Marian should tell Leveque.

(The answer needs to be very specific and details)

Answer 1

Comment in case of any doubt.