Mr. Monk, tired of selling World War I era merchandise for years, is currently thinking of entering the breakfast cereals market in North Jersey with a new brand called Mr. Monk. Mr. Monk has estimated brand awareness to be approximately 90%, because the brand will enjoy high local TV and point-of-purchase promotion budgets. For manufacturing and marketing, Mr. Monk would have to spend $10 million towards fixed costs. Just one supermarket chain, which alone sells 35% of total breakfast cereals sold in the target market, will carry the brand. According to Mr. Monk, this brand, to be priced at $0.75 for a half-lb. pack, will sell enough to carry his company out of the red. An MR agency appointed by Mr. Monk has contacted a sample of households to get `intention to buy' information for the brand. The agency reports that, given 100% awareness and availability, the percentage of respondent households who have given different ratings for `intention to buy' on a 10-point scale (ranging from 0 = `would definitely not buy' to 10 = `would definitely buy') is given as follows:

Response on 0-10 scale	Percent of responses
1	25
2	20
3	18
5	26
8	11

Mr. Monk's cost accountant reports that the variable cost for 1 lb. of the cereal comes to $1.05. If the target market in North Jersey consists of 100,000 households each buying a half-lb. pack per two weeks, answer the following questions:

1) What demand would you project for Mr. Monk for the current year?

2) Do you think Mr. Monk will sell enough to break even? Should he introduce his namesake cereal brand in California?

Justify your answers with suitable calculations. (assume there are only 24 fortnights in the year)

HINTS: To calculate the expected demand (yearly sales forecast), you need to calculate the number of households expected to buy the product. You need to consider the awareness and availability. When market research company conducted the study, the findings were based on 100% awareness and availability of the product.

First, you need to consider the number of households expected to buy, given 100% awareness & availability.

As you can see from the survey result, not everyone has the same intention to buy the product.

Therefore,

1) you need to first calculate the expected number of individuals within each response scale, given the fact that the total number of households is 100,000. How many households are expected to fall into response 1, 2, 3, 5, and 8? How would you calculate that? The hint for this comes from the table provided in the question.

2) after that, you need to think about whether people who respond to 1 have the same intention of purchasing the product compared to the ones who are with the response scale '8'. The answer to this question would be, as you expect, is "no."

HINT: To address the issue, you can think about the 0-10 scale as % of purchase intention. For instance, those who respond to '10' means that they are 100% sure that they will try the product. In other words, those who respond to '8' means that 80% of the time they are willing to purchase the product. You need to consider these two factors to calculate the number of households expected to buy, given 100% awareness & availability.

By considering these two factors, you can recalculate the number of households expected to buy the product given 100% awareness & availability.

However, the market research company assumes that the awareness of the product is 100%. You need to consider the actual awareness and availability of the product.

HINT for actual awareness: Although the market research company conducted a study with an assumption of 100% awareness, the actual brand awareness is approximately 90% only. HINT for actual availability: don't forget the actual availability of the product (read the description below). What would be the availability of the product among the target market? Just one supermarket chain, which alone sells 35% of total cornflakes sold in the target market, will carry the brand.