Case Study # 1: South Delaware Coors, Inc.

Topics: Variable cost, Costs, Cost Pages: 2 (623 words) Published: November 14, 2008
Case Study # 1: South Delaware Coors, Inc.
Analysis Summary

Main Problems

Two issues are present in the case. The first is a decision on what research should be conducted by Manson and Associates to allow Larry Brownlow to estimate the feasibility of a Coors beer distributorship for a two-county area in Delaware. This issue is evident, even stressed, throughout the case. The second issue is a decision on whether or not the distributorship is feasible or, in other words, a go/no-go decision by Brownlow regarding his application. This issue is largely implicit in the case.

Decision-Making Process
The framework used in this note is organized around the estimates of industry demand, market share, costs, and performance. All data references in the following quantitative analyses come from Exhibit 1 in this note. 1.Industry Demand

It is possible to estimate industry demand in two manners. The first involves results of Studies A and B and could be termed a “per capita” approach. Take the per capita consumption figures from Table A (for south Delaware) and multiply these data by population estimates from Table B. The estimates for 1990 should be around 229,000 people living in the two counties, 160,500 of whom are age 21 and over. Multiplying 229,000 people by 27.2 gallons per capita consumption will produce an industry demand total of around 6.2 million gallons in 1990 (multiplying 160,500 people over age 21 by 39.4 gallons will produce an estimate of 6.3 million gallons). The second manner of estimating involves study E data and could be termed a “taxes paid” approach. Totaling taxes paid by the six distributors for 1987 and 1988 yields $288,000 and $306,000, respectively. Dividing each of these figures by 6 cents, the tax per gallon, provides consumption estimates of around 4.8 and 5.1 million gallons. You will need to extend these results to 1990 according to your projections. Since these two methods tend to generate different estimates for the...
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