Coors Case

                                    Coors Case                                             

1. Industry demand (1990):  The first step in the break-even analysis is to figure out the industry demand for 1990, using the Per Capita Method or the Tax Paid Method. Try both and see if they would give you similar answers. What does it tell you about the computer model used for projections in Study A and B?

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Calculating the Estimated demand was simple by just pulling the data for the studies. Total population plus gallons per person would give us an estimated of the industry consumption in the area.

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I am using the Tax Paid Method due to it seems more reliable to me for making projections. Also Mr. Brownlow should adopt a very conservative position and this method is the one that projects less revenue. Using the info on the slides plus the study E we can come out with those numbers. (*By the way, sorry about the numbers format, my Excel is in Spanish and we use dots instead of commas to separate numbers).

2. Fixed Costs: The next step is to calculate the fixed cost for the first year (1990)using the following information. Keep in mind that the start-up capital of $800,000 mentioned in the case did not include cash and receivables. You need to find out what the actual start-up capital should be. Since Mr. Brownlow did not have enough money to cover the start-up capital, he needed to borrow. You Should also consider first year interest payment when you calculate the fixed cost.

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Considering the 11.1% Cash and the 14.8% in Receivables our total start-up capital should be $1,081,081.

Fixed Cost are the sum of the Interest Payment, Salaries, Other Fixed Cost. The only thing that I had to calculate was the interest payment that depended on the total capital to borrow which was 681,081. The million that I mentioned before minus the money borrowed from the family. 10% of that gave us the interest payment and with that the total fixed cost.

3. Unit Contribution Margin:  

First step: you need to figure out the price Mr. Brownlow can charge to the retailers based on the information from Study I. Keep in mind that there are two different sizes: Keg and 6-pack.