Prepare a break even analysis of the Jameson Irish Whiskey artisan cheddar in units assuming two years of sales and fixed costs as outlined in case exhibit 6. Note that "factory equipment" would usually be treated as a capital investment rather than a fixed cost, but go ahead and assume all those costs in exhibit 6 are fixed costs. For variable costs, use the COGS for the "proposed artisan" in exhibit 3 and the CSP and TP variable costs as well as PR-U royalty mentioned on page 6. For pricing, note the wholesale price to retailers and wholesale-distributor margin on page 6 as well. That wholesale margin (20%) is what is used to calculate the COGS - distribution in exhibit 3. Do you think Caesan can reach the break even sales for the new cheese? Why or why not?

use exhibit 6, exhibit 3, and page 6

Exhibit 1 Caesan Product Lines by Percentage of Retail Revenue (2018) Exhibit 2 Caesan Consolidated Income Statement (Annual 2018) Exhibit 3 Caesan Cheese Gross Margins per Unit (Annual 2018 and Proposed) Caesan Cheese Cooperative (hereafter, "Caesan") receives exclusive licensing rights to utilize the Jameson@1 Irish Whiskey trademark in connection with natural cheese it sells in the United States and Canada, as long as the cheese meets or exceeds established quality standards. Caesan will not produce, market, or sell any other version of whiskey cheddar (natural, artisan, farmstead, or variations thereof) for the period of the agreement. Caesan pledges to use its best efforts in marketing Jameson@ Irish Whiskey Artisan Cheddar. Pernod Ricard USA (hereafter, "PR-U") promises to provide limited support for marketing and communications through its website, media relations, and cooperative advertising. Caesan will pay a royalty of $0.25 to PR-U for every unit of Jameson@ Irish Whiskey Artisan Cheddar sold at wholesale. Jameson@ Irish Whiskey Artisan Cheddar is required to meet a series of steadily increasing annual net sales targets during the first two years of the agreement. The sales targets must also be met in each subsequent year. The Jameson@ Irish Whiskey brand name will be displayed prominently on each unit. All advertising and promotional materials for Jameson@l Irish Whiskey Artisan Cheddar require written approval from PR-U prior to publication or use. PR-U may terminate this agreement during 2020 if, in PR-U's sole judgment, sales of Jameson(B) Irish Whiskey Artisan Cheddar adversely impact sales of Jameson@ Irish Whiskey or any derivative thereof. Exhibit 6 Two-Year Budget for New Product Launch (U.S.\$) Total sales of Irish Whiskey accounted for only 7.5\% of the total whiskey market in 2018, but Jameson(1) was the best-selling Irish whiskey brand with a 78% market share. 20 Analysts suggested that its popularity would continue to grow due to its brand loyalists and unique flavors. Total whiskey sales were projected to grow by 26% between 2018 and 2023. Loyal Irish whiskey drinkers were typically young to middle age, lived in metropolitan areas, and had high disposable incomes. 21 While other whiskey-flavored cheddars were available, none used a branded whiskey as an ingredient. PR-U also had no interest in selling Jameson Irish Whiskey Artisan Cheddar through direct-to-consumer channels. Both Caesan and PR-U agreed that offering only through retail channels provided greater promotional opportunities and avoided the potential for channel conflict. Taste Testing and Concept Testing In March 2018, Caesan hired a research firm to conduct taste tests of its Jameson Irish Whiskey Artisan Cheddar. The firm recruited 200 adult shoppers in supermarkets in five major markets. In blind taste tests, consumers were asked to select among three products: Caesan's Jameson@ Irish Whiskey Artisan Cheddar, Kerrygold's Aged Cheddar with Irish Whiskey, and Cahill's Farm Cheddar-Irish Whiskey. Again, Caesan's offering was preferred 2 to 1 over both Kerrygold and Cahill. In April 2018, Caesan hired a research firm to gauge purchase intent for the concept. This firm used A/B testing, which compared two offerings to determine which one performed better. Consumers reviewed product descriptions for six cheddars: three from a leading brand and three from Caesan. Of the six offerings, the test varied one of Caesan's offerings by use of ingredient branding and price: Irish Whiskey Artisan Cheddar or Jameson Irish Whiskey Artisan Cheddar. The firm recruited 1,000 consumers representing a national sample of adults; consumers were provided a small incentive for participation. To participate, consumers must have purchased cheddar priced above $9.40 per pound from any supermarket's specialty cheese department at least once in the past three months; 40% of all potential respondents qualified for participation. Respondents were provided with pictures and descriptions of the cheddars and instructed to add the ones they would want to purchase into a shopping cart. Respondents also had the option not to purchase. Exhibit 4 provides the survey results. Based on past market research experience, Deidra Kelly expected half the respondents who expressed purchase intent would buy the product in a store. Marketing Program By March 2019, Caesan and PR-U drafted the licensing contract (see Exhibit 5). Jameson Irish Whiskey Artisan Cheddar would be sold in seven-ounce, wax-wrapped bars in supermarket specialty cheese sections. Wax-wrapping best protected the moisture content and flavor, and consumers perceived it as being premium quality and authentic. The front of the packaging would include the product name, the Caesan logo, the Jameson logo, the award logo, artisan and origin logo ("Artisan Cheddar Made in Wisconsin"), and a description indicating that the cheese was made in small batches using an original family recipe. It stipulated a launch in January 2020. Kelly set the MSRP to $7.49 per unit, which matched competitor prices and prices tested in the A/B concept test. The wholesale price to retailers would be $4.75 per unit. Caesan would pay food distributors 20% of the wholesale price and pay PR-U $0.25 per unit. The plan allocated $0.07 per unit for consumer coupons and $0.13 per unit for retail trade allowances