Forecast Statements for 2006-2010 (all figures in $)

Mountain Man Light Forecast Statement

Particulars 2005 2006 2007 2008
Selling price per beer 97 97 97 97
Market Increase 4% 4% 4%
Total Market Revenue(in barrels) 18744303 19494075 20273838 21084792
Market share of Mountain Man 0.25% 0.50% 0.75%
Mountain Man Light Share 48735 101369 158136
Total Revenue 4727313 9832811 15339186
Fixed cost of marketing* $ 877,637.46 $ 265,485.91 $ 414,158.02

Total Fixed marketing cost $ 2,878,169.37 *Note: As per exhibit 1, advertisement expenses were 2.7
As we don't know the break-up of SG & A costs, I have as
trend will continue i.e. advertisement/marketing cost wil
n $)

2009 2010 Total

97 97
4% 4%
21928183 22805311
1.00% 1.25%
219282 285066
21270338 27651439
$ 574,299.12 $ 746,588.86 $ 2,878,169.37

it 1, advertisement expenses were 2.7% of total revenue.

he break-up of SG & A costs, I have assumed that the same
i.e. advertisement/marketing cost will be 2.7% of total revenue
 Calculation of contribution of MM Lager lost due to cannibalization
Particulars 2005 2006 2007 2008
No. of barrels sold 520000 509600 499408 489420
Cannibalization @ 12.5% (in barrels) 63700 62426 61177
Contribution per barrel 30.07 30.07 30.07 30.07
Contribution lost due to cannibalization 0 $ 1,915,459.00 $ 1,877,149.82 $ 1,839,606.82
to cannibalization
2009 2010 Total
479631 470039
59954 58755
30.07 30.07
$ 1,802,814.69 $ 1,766,758.39 $ 9,201,788.72
 Mountain Man Lager Forecase Statement
Particulars 2005 2006 2007 2008
Selling price per beer 97 97 97 97
No. of barrels sold 520000 509600 499408 489420
Revenue from Lager 50440000 49431200 48442576 47473724.48
Variable cost (66.93 per barrel) 34803600 34107528 33425377.44 32756869.891
Contribution 15636400 15323672 15017198.56 14716854.589

Loss in contribution due to 2% reduction $ 312,728.00 $ 306,473.44 $ 300,343.97

 2009 2010 Total
97 97
479631 470039
46524249.99 45593764.991
32101732.493 31459697.844
14422517.497 14134067.147

$ 294,337.09 $ 288,450.35 $ 1,502,332.85

Calculation of number of barrels of Mountain Man Light required to be sold to recover costs in Question i, ii, iii

Fixed marketing cost $ 2,878,169.37

Contribution lost due to cannibalization $ 9,201,788.72
Loss in contribution due to 2% reduction $ 1,502,332.85
Costs to be recovered $ 13,582,290.94

Selling price of MM Light(per barrel) $ 97.00

Variable cost of MM Light(per barrel) $ 71.62
Contribution per barrel $ 25.38

No. of barrels required 535157 Costs to be recovered/Contribution per barrel

uestion i, ii, iii

tion per barrel

 Mountain Man Light Forecast Statement
Particulars 2005 2006 2007 2008
Selling price per beer 97 97 97 97
Market Increase 4% 4% 4%
Total Market Revenue(in barrels) 18744303 19494075 20273838 21084792
Market share of Mountain Man 0.25% 0.50% 0.75%
Mountain Man Light Share 48735 101369 158136

Total no. of barrels expected to be sold (A) 812589

No. of barrels required as calculated in Q iv (B) 535157

As A > B, it is possible to realize Mountain Man Light's break-even sales quantity in Q iv within 2006-10 period
 2009 2010
97 97
4% 4%
21928183 22805311
1.00% 1.25%
219282 285066

n 2006-10 period
 Mountain Man Lager Forecase Statement
Particulars 2005 2006 2007 2008
Selling price per beer 97 97 97 97
No. of barrels sold 520000 509600 499408 489420
Revenue from Lager 50440000 49431200 48442576 47473724.48
Variable cost (66.93 per barrel) 34803600 34107528 33425377.44 32756869.891
Contribution 15636400 15323672 15017198.56 14716854.589

Loss in contribution due to 2% reduction $ 312,728.00 $ 306,473.44 $ 300,343.97

Current price per barrel $97

Loss in contribution to be covered $ 1,502,333
No. of barrels expected to be sold 2968098
Loss to be covered per barrel $ 0.51

So, price of each barrel should be increased by $0.51 to cover contribution loss in Q iii. New price will be $97.51
 2009 2010
97 97
479631 470039
46524249.99 45593764.991
32101732.493 31459697.844
14422517.497 14134067.147

$ 294,337.09 $ 288,450.35

ice will be $97.51