One year later, Michelin is considering optimizing its distribution strategy for the new tire. There are two options available: Option 1: Distributing the tires through manufacturer-owned outlets. Michelin would expect a (manufacturer) selling price of $95.00. It also expects to achieve a market share of 4.5% of the replacement tire market. Option 2: Distributing the tires through mass merchandisers. Michelin would expect a (manufacturer) selling price of $70.00. It also expects to achieve a market share of 9% of the replacement tire market. The fixed and variable costs are as described above, with one exception: If Michelin sells more than 500,000 tires, the advertising expenses increase to $6,500,000. Calculate Michelins profit for Option 1 and Option 2.

9The variable manufacturing costs needed to produce a tire are $40.00. The cost of the machinery needed to produce the new tire is $15,000,000 per year. The R&D expenses incurred toward developing the new tire are $5,000,000. In order to help build a quality image for the tire, the marketing manager is considering spending $5,000,000 on advertising. The managers salary is $100,000 and the sales personnel of Michelin receive a5% commission on the selling price. Part I a)What unit sales are required for Michelin to break even? b)What market share in the replacement tire market does Michelin need to break even? c)What is Michelins profit if it gets a 10% share of the replacementtire market? d)If the wholesalers demand a 20% margin, how many units of tires would Michelin have to sell to break even? Part II One year later, Michelin is considering optimizing its distribution strategy for the new tire. There are two options available: Option 1: Distributing the tires through manufacturer-owned outlets. Michelin would expect a (manufacturer) selling price of $95.00. It also expects to achieve a market share of 4.5% of the replacement tire market. Option 2: Distributing the tires through mass merchandisers. Michelin would expect a (manufacturer) selling price of $70.00. It also expects to achieve a market share of 9% of the replacement tire market. The fixed and variable costs are as described above, with one exception: If Michelin sells more than 500,000 tires, the advertising expenses increase to $6,500,000. Calculate Michelins profit for Option 1 and Option 2. Based on profit, which of the two strategies should Michelin implement?