Questions: Please answer with work.

1.For Nescafe Classic, what is the current (i.e. before Farmers Blend) variable cost of coffee

beans for a 100-cup jar?

a. $3.20

b. $2.40

c. $6.00

d. $3.00

e. $4.80

2.For Nescafe Taster's Choice, what is the projected variable cost of coffee beans for a 100-cup jar if you decide to use the FLO Fairtrade mark for Farmers Blend?

a. $2.00

b. $5.82

c. $4.66

d. $2.91

e. $2.33

3.If you were to launch Farmers Blend at retail price of $15.00 and a contribution margin for

Nescafe of 35%, how many 100-cup jars would you need to sell to break even?

a. 1,262,626

b. 14,285,714

c. 952,381

d. 1,190,476

Your team has gathered the following information to assist with your decision. Farmers Blend would launch in 100-cup jars (standard size) Regardless of branding choices, $5 million for advertising and promotions should produce 40% awareness among instant coffee drinkers and 60% ACV distribution Nestle surveyed 200 instant coffee drinkers in the US. Results indicate that they are sympathetic to the plight of coffee farmers, with 50% willing to try a fair trade coffee Data from FLO states that half of all coffee drinkers globally (regular or instant) who heard of Fairtrade have bought it at least once . . 0 Retail margins for instant coffee are 20% (averaged across channels and brands). Due to Nestle's size, they sell direct to retailers without using a wholesaler Nescafe's contribution margin is 40% for Classic and 30% for TC Raw beans represent 50% of the variable cost for both Classic and TC. You can assume the cost of beans will be the same for Farmers Blend with the exception of the FLO premium should you decide to go that route. Although Nescafe consumers resemble other instant coffee drinkers in the US, the TC consumer tends to be older (age 55+) than the Classic consumer (age 18-54). Exhibit Folger's Crystals Maxwell House Nescafe Classic Nescafe Taster's Choice Starbucks VIA* Store brands Other 37% 26% 21% 14% 8% 10% 7% Percent of instant coffee drinkers who report consuming each brand in the last 6 months (Source: MRI) Retail price per 1 cup Retail price per 100-cup Jar *Sold as 8 single-serve packs in a box $0.06 $0.05 $0.10 $0.08 $1.00 N/A $0.04 $4.00 $6.00 $5.00 $10.00 $8.00 NA N/A