Using the information in the case, calculate how many barrels of MM Light MMBC would have to sell in order tobreak even. You will need to do the calculation for 2006 and 2007. See the tips below for more details. (4 Points)

Assume that barrel unit sales of MM Lager are 520,000 in 2005 and are projected to decline 2% per year due to market trends

Assume that the cannibalization rate is 7.5% on the 2006 and 2007 barrel sales of Mountain Man Lager if MM Light is introduced

Fixed Costs of Light = Profit Loss from Cannibalization + Other Incremental Expenses for Light (Advertising and SG&A)

Profit Loss from Cannibalization = Margin of Lager * Cannibalized Number of Units

Note that you will need to compute the price of a barrel of lager to obtain the margin

You can assume that the COGS/barrel is constant in your analysis

Assume no discounting or NPV for this problem

Breakeven = (FC2006 + FC2007) Margin of Light

2. From 1, calculate how many months it would take for MMBC to break even. Use the assumptions that barrel sales of Light Beer in the Region will continue to grow at 4% per year and MMBC will be able to obtain a .25% market share in 2006 and a .75% market share in 2007. (2 Points)

3. Given that your sales are expected to decline 2% per year, managerially you will need to consider some alternative ways to reverse this trend. What are the next three best (and distinct) options for MMBC to pursue if they choose not to release Mountain Man Light? Think about what will befeasible and effective for MMBC. (4 points)