Derrido Is an American Firm That Has Produced Several Successful

question 19

Short Answer

Derrido is an American firm that has produced several successful animated TV series in the United States. It is considering contracting with one or more international companies as a way to market its products overseas.
Derrido's marketing director thinks that the company should craft a contractual agreement as an initial entry strategy, because the company might want to choose a more advanced entry strategy later. Which of the following, if true, would strengthen this position?
Foreign partners usually want to enter into contractual agreements with American companies for a long-term period.
A contractual agreement should spell out as many expectations of the foreign partner as possible.
Contractual agreements should be entered into only if the foreign partner is extremely reliable.
Contractual agreements require approval by legal specialists from all countries involved.
Contractual agreements allow a company to provide for open, flexible terms of operation.

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Definitions:

Variable Cost

Costs that vary in direct proportion to changes in the level of production or sales volume.

Fixed Cost

Fixed expenditures, including rent, salaries, and insurance, that are unaffected by changes in production or sales volumes.

Contribution Margin Ratio

A measure indicating the percentage of each sales dollar that contributes to covering fixed costs and generating profit, calculated as (Sales Revenue - Variable Costs) / Sales Revenue.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums, providing predictability in budgeting.