Lets modify the scenario from Q1 and Q2 a bit. Management estimates that the incremental promotion program required to generate sufficient demand to boost sales by 20% will need to be:

Marketing Costs	$ 60,000 (exclusive of commissions)
Consumer Advertising	$ 62,868
Trade Promotion	$ 37,799
Sales Promotion	$ 25,000

The total market for craft beer sold in six packs is about 2,500,000 six packs per year. What additional market share will Shannons need to achieve in order to break-even on the incremental costs that are anticipated? Express your answer in percent format to two decimal places. For example, 5.00 for five percent or .50 for one-half of one percent. Do not include the percent sign.

Q1/Q2

QUESTION 1

Shannons distributes its beer through a wholesaler, Miller of Denton. The retail selling price for a six pack of its typical craft beer is $12.00. The retailers cost per six pack is $8.00. The wholesaler selling the beer to the retailer for this price. Shannons sells a six pack to the wholesaler for $5.40. Shannons variable costs of production, packaging, and distribution are $3.60 per six pack. Shannons has the following annual fixed operating and marketing costs:

Marketing Costs	$51,959
Consumer Advertising	$31,831
Trade Promotion	$30,000
Sales Promotion	$18,000

What is Shannons annual break-even in six packs of beer sold?

ANSWER:75883.33

QUESTION 2

Given the above information in Q1, Shannons wants to increase its sales to retailers by 20% in the next year. Management estimates that the incremental promotion program required to generate sufficient demand to boost sales by 20% will be:

Personal Selling Costs	$ 60,000 (exclusive of commission)
Consumer Advertising	$ 60,293
Trade Promotion	$ 38,164
Sales Promotion	$ 25,000

Shannons will need to hire an additional sales person (paid a salary and commission) and provide some added administrative support. The sales persons salary plus administrative support will cost about $60,000 per year. The sales persons commission will be the equivalent of $0.05 per six pack sold. The incremental costs of consumer advertising, trade promotion, and sales promotion necessary to support sales in the new market will be substantial as indicated in the table above. What level of sales in six packs will be required to break-even on the incremental costs that are anticipated?