Problem Statement for Rocko Handbags Limited:
Natalia Martinez, an entrepreneur, created the brand "Rocko," which produces high-quality bags and satchels with a European flair for the American and Canadian markets.
Catering to the youth demographic, the Brand holds significant sway. In order to expand her product's reach, Natalia plans to target both the Asian and Latin American markets. However, she receives an offer from a leading retail store in Brazil to supply 20,000 units of the Pippi bag at a price of $8 per unit. This offer falls below the production cost of $10 per unit.
According to her bookkeeper, entering the Latin American market was a risky move for Natalia. She is now faced with the decision of whether or not to continue in this market. Will accepting the Brazilian offer result in Natalia lo
...sing money? It may appear so, as normal calculations show a loss of $2/unit. However, the case states that the production house is only operating at 70% capacity and could produce more. As fixed costs are allocated per unit based on capacity utilization, it can be concluded that Natalia will not necessarily lose $2 in total.
Increasing capacity utilization results in a decrease in fixed cost per unit. Based on my analysis, if Natalia increases utilization to 100%, she can produce approximately 142,850 units ((100,000*100)/70) at a cost of $8.50 per unit ((500,000/142,850) = 3.5 + 5). If she wants to produce 120,000 units, the cost per unit would be $9 ((500,000/120,000) = 4.17 + 5).
The woman will experience a monetary loss in both scenarios if the unit cost is $17. However, other factors besides income and expenses must b
considered before deciding whether to pursue this opportunity. These critical considerations require careful attention.
There is no text provided for and unifying. Can you please provide the original text?
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