Mountain Man Brewing - Calculations

What is the breakeven number of barrels required to make up for the lost sales of the lager brand, and
increased fixed costs associated with the launch and ongoing product support?

MMBC revenue in 2005 $ 50,440,000 A Case Exhibit 1

MMBC barrel production in Section: “challenges ahead”
2005 520,000 B
Revenue/barrel $ 97.00 C Calculation (A/B)
VC/barrel $ 66.93 D Section: “challenges ahead”
Projected % reduction in Case Exhibit 5A
barrel production 4% E
Projected Barrel Production 499,200 Z B*.96
Projected % cannibalization 5% F Section: “challenges ahead”
Projected contribution loss $ 750,547 G Calculation [(Z*.05)*(C-D)]

Higher VC of light beer $ 4.69 H Section: “challenges ahead”

Contribution/barrel Lager $ 30.07 I Calculation (C-D)
Contribution/barrel Light $ 25.38 J Calculation (C-D-H)
# barrels needed to Calculation (G/J)
recover lost contribution 29,572 N

New brand advertising cost $ 750,000 K Section: “challenges ahead”

Incremental SG&A $ 900,000 L Section: “challenges ahead”
# barrels needed to Calculation [(K+L)/J]
recover ad/SG&A costs 65,012 M
Total number of barrels Calculation (M+N)
needed to break even 94,584

Assuming .25% share of EC light beer market, how long will it take MM to break even?

Projected sales Mountain 46861 Assume .25% share

Man Light
Months to breakeven 24.2

** These calculations represent “best case” scenario of 5% cannibalization. “Worst case” scenario (using 20%
cannibalization) increases time to breakeven.