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In order to make the US distributors to make a large orders, the manufacturer plans to provide distributors with a revenue sharing contract. The manufacturer agreed to reduce the price from $20 to $15 per bottle. Distributors can sell all unsold products to discount stores at a price of $5 per bottle. In return, the distributor gives 15% of its sales revenue to the manufacturer. The manufacturer does not need to save the product. For manufacturers, fixed and variable production costs remain the same. The distributor has determined that if the expected profit of the revenue sharing contract is equal to $84,000, if the order quantity is 10,000 bottles, its expected profit is $90,700 and the order quantity is 8,000 bottles.

(a)

(a1) Describe TWO drawbacks of using the revenue sharing contract in this case.

(a2) Explain with TWO reasons that support transport of hand sanitizing gel from China to the US by sea.