1) The case mentions a project that Barrell conducted with a Canadian Winery in 2017, which was not successful. Financial data for the project is below in USD$000's). This data only contains costs that are directly attributable to the project, from the perspective of Barrell. 500 100 Sales COGS Gross Profit Selling & Admin Costs Income from Segment 400 350 Please answer the following questions: a) Why would this project have been considered a "flop if the Income from Segment was positive? (4 marks) b) Suggest one financial-related change that the company should make if they pursue the VeloVelo project, in partnership with a French winery. Support your answer with course concepts and calculations, such as contribution margin and BEP. (6 marks) 2) The following is pro forma financial data for year one of the competing proposals (Kerry's Revenge vs. Banhill Station) as relates to BIUKE's trading area only. All data is in US dollars: 2020 Unit Sales (estimated) 2020 Selling Price/bottle 2020 Contribution Margin Selling Expenses Marketing Expenses (5,000 person-hours) Marketing Person-Hours (estimated) Kerry's Revenge Banhill Station 200,000 300,000 $9.50 $19.00 30% 35% $ 180,000 $350,000 $1,500,000 500 4,000 The marketing expense will be allocated in proportion to the estimated number of marketing hours required to prepare and implement the launch. Please answer the following questions: a) Prepare a 2020 pro forma Income Statement (only until the EBIT line) for each product proposal. (10 marks) b) What is the break-even point (in unit sales) for each proposal? How much revenue is required to reach this break-even point? (8 marks) c) Assume that each project requires at least a $300,000 profit in Year 1. Calculate the Optimal Price Point (OPP) for each project, using the 2020 Unit Sales value from the table above. Do you think the company should change the price for each product to the optimal price that you calculated? Explain why or why not. (8 marks) d) What financial risks should be considered when looking at this financial data? Hint: remember that this is pro forma data for products that are launching in British and European markets. (6 marks) e) Based solely on your quantitative analysis and the information above, which proposal should the company launch? Support your answer with specific calculations. (8 marks) 3) Should Millar approve Carson's proposal to launch VeloVelo? The possible answers are "yes" or "no". Develop a pro and con list for each, and then make a recommendation with your justification. The justification should go beyond a recitation of the pro-con list; instead, it should include why either the pros or the cons outweigh the other. (25 marks) 4) What action should Millar take about the competing proposals for Banhill Station and Kerry's Revenge? Should he accept whatever Carson decides to do, or override Carson and assert his own preference? Explain your reasoning regardless of what you decide. As you do, consider the effect of the decision on Bl as a whole and on BIUKE. (25 marks) 1) The case mentions a project that Barrell conducted with a Canadian Winery in 2017, which was not successful. Financial data for the project is below in USD$000's). This data only contains costs that are directly attributable to the project, from the perspective of Barrell. 500 100 Sales COGS Gross Profit Selling & Admin Costs Income from Segment 400 350 Please answer the following questions: a) Why would this project have been considered a "flop if the Income from Segment was positive? (4 marks) b) Suggest one financial-related change that the company should make if they pursue the VeloVelo project, in partnership with a French winery. Support your answer with course concepts and calculations, such as contribution margin and BEP. (6 marks) 2) The following is pro forma financial data for year one of the competing proposals (Kerry's Revenge vs. Banhill Station) as relates to BIUKE's trading area only. All data is in US dollars: 2020 Unit Sales (estimated) 2020 Selling Price/bottle 2020 Contribution Margin Selling Expenses Marketing Expenses (5,000 person-hours) Marketing Person-Hours (estimated) Kerry's Revenge Banhill Station 200,000 300,000 $9.50 $19.00 30% 35% $ 180,000 $350,000 $1,500,000 500 4,000 The marketing expense will be allocated in proportion to the estimated number of marketing hours required to prepare and implement the launch. Please answer the following questions: a) Prepare a 2020 pro forma Income Statement (only until the EBIT line) for each product proposal. (10 marks) b) What is the break-even point (in unit sales) for each proposal? How much revenue is required to reach this break-even point? (8 marks) c) Assume that each project requires at least a $300,000 profit in Year 1. Calculate the Optimal Price Point (OPP) for each project, using the 2020 Unit Sales value from the table above. Do you think the company should change the price for each product to the optimal price that you calculated? Explain why or why not. (8 marks) d) What financial risks should be considered when looking at this financial data? Hint: remember that this is pro forma data for products that are launching in British and European markets. (6 marks) e) Based solely on your quantitative analysis and the information above, which proposal should the company launch? Support your answer with specific calculations. (8 marks) 3) Should Millar approve Carson's proposal to launch VeloVelo? The possible answers are "yes" or "no". Develop a pro and con list for each, and then make a recommendation with your justification. The justification should go beyond a recitation of the pro-con list; instead, it should include why either the pros or the cons outweigh the other. (25 marks) 4) What action should Millar take about the competing proposals for Banhill Station and Kerry's Revenge? Should he accept whatever Carson decides to do, or override Carson and assert his own preference? Explain your reasoning regardless of what you decide. As you do, consider the effect of the decision on Bl as a whole and on BIUKE. (25 marks)
