KitchenArt: Cast Iron for the New Generation [25 Points]

Cast iron cookware has become the new in product for at home cooks. KitchenArt is a small company that specializes in producing cast iron cookware. While it only produced cast iron pots previously, it has recently introduced a cast iron skillet. In comparison to other cast iron skilletscurrently sold in the market, KitchenArts cast iron skillet is 25% lighter in weight and is more durable. The retail selling price of the cast iron skillet is $30.

The market for cookware is expected to reach 5 billion dollars in retail sales. Cast iron productsmake up 20% of this market, and within the cast iron product category, 30% comes from skillets. Within the cast iron skillets market, 30% of sales come from home cooks, 10% of sales come from professional chefs, and 60% of sales from restaurants. Currently, KitchenArt targets home cooks only.

To manufacture the cast iron skillets, an initial investment for the product facility was $650,000 and the general overhead expenses was $100,000. To promote these skillets, KitchenArt will set aside $250,000 for advertising, such as TV ads and billboards and $200,000 on fixed promotions in the first year. KitchenArt expects 25% of the manufacturers selling price to go for labour costs, 10% for raw material expenses, while 8% will be for factory operating costs and 7% for transportation expenses. KitchenArt decided to sell its cast iron skillets headset through distributors rather than directly to retailers. Distributors expect margins of $8 while retailers look for 25% markup before selling to customers.

Before launching nationwide, KitchenArt decided to market test its skillets to evaluate its potential success in the national market. The test market size of cookware is estimated at $320,000,000 and is otherwise expected to have the same characteristics as the nationwidemarket described above. KitchenArt has decided that the market test will last a period of ninemonths. In the first 6 months, KitchenArt sold the skillets at its original retail price. During the following 3 months, KitchenArt decided to run a promotion, selling the skillets at 10% off its original retail price. Sales for the first six months reached 3000 units. A total of 3150 units were sold during the following three months. KitchenArts decision to introduce its skillet in the test market also influenced the sales of two other products (see table below):

	Starfry Silicone Spatula	Ti-Fal Frying Pan
Retail Price	$10	$25
Units Sold First 6 months	600	2400
Units Sold Last 3 months	360	900

(*assume all sales are evenly distributed during the 9 months)

Q3-1 [10 points] Given the information above, calculate the break-even market share for the cast iron skillet if KitchenArt wants to breakeven in the first year after national launch (assume no price promotions). Please make your calculations clear.