Question

Here’s what we know:

Joe’s Budget For Cards:

$18,500

TOPPS cards care sold to a retailer only by the case.

A case contains 20 boxes.

A box contains 36 card packs.

Each box costs $30.00

Each box retails for $44.95

Each pack retails for $2.95

Charlie sold 70% of TOPPS cards in full boxes.

Charlie sold 30% in individual packs.

Charlie bought 25 cases last year.

He expects a 7% increase in demand next year.

Fleer EX cards are sold to a retailer only by the box.

Each box costs $125.

Each box retails for $179.

Each box contains 20 card packs.

Each pack retails for $8.95

Charlie bought 20 boxes last year.

Almost all Fleer EX cards are sold in full boxes.

He expects a 5% increase in demand next year.

The 7th Inning maintains around ten million cards in-stock year round, though the number is highest early each year following the release of the new professional sports team cards. In addition to major professional sports cards, Charlie also carries cards that feature movies, military hardware, and fantasy game related cards. The trading card industry has grown so much over the past several years that ordering cards is a complicated business that requires market savvy and hands-on experience. Charlie has decided to let Joe try to figure out what quantity they should order of two of his most popular selling sports trading cards, the Topps cards and the Fleer EX cards. He gives Joe a budget of $18,500 to spend and provides him with the basic cost, pricing, and other data that he will need to arrive at a recommended purchase quantity.

1. Figure out how many of each card to order, how much the inventory will cost, and what the likely net revenue and net profit will be for each card order and for the total order of both cards.
2. Why is it important to know the historical sales pattern of each brand before ordering cards for the next year?

Answer 1

Solution:

Inventory cost this year:

Topps cards = No. of case x Boxes per case x Cost per box

= 25 x 20 x 30

= 15,000

Fleer Ex = No. of box x Price per box

= 20 x 125  

= 2,500

Total inventory cost = 15,000 + 2,500 = 17,500

Cases for Topps cards = 25 x (1.07) = 26.75 ~= 27

Boxes for fleer Ex = 20 x (1.05) = 21

Inventory cost total:

Topps cards = No. of case x Boxes per case x Cost per box

= 27 x 20 x 30

= 16,200

Fleer Ex = No. Of box x Price per box = 21 x 125 = 2,625

Total inventory cost = 16,200 + 2,625 = 18,825

The budget is exceeded by 18825 -18500 = 325

So, either he should order one Topps cards case less or try to get the Topps cards in boxes.

For 26 cases of Topps cards = (No. of cases x Box per case x Pack per box x Selling price of the pack - (No. of cases x Box per case x Cost per box)

= (26 x 20 x 36 x 2.95) - (26 x 20 x 30)

= 39,624

For 21 boxes of fleer ex cards = (No. of boxes x Pack per box x selling price of the pack) - (No. of the box x Cost per box)

= (21 x 20 x 8.95 - 21 x 125)

= 3,234

So, net profit = 39624 + 3234

  = 42,858