Breeders Own Pet Foods, Inc.

Case Analysis Report

Business 8106: Marketing

Submitted By
Afsal Aboobacker
201589611

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Introduction
First in Show Pet Foods, Breeders Own Pet Foods Inc. has been a major producer of dog food for
show dogs within the dog show circuit for several years. Breeders Own Pet Foods, Inc. decides
to break into the retail dog food market in the Boston, Massachusetts & Major metropolitan area
and subsequently into the national wide market. Not only does Breeders Own Pet Foods intend
to enter an already established market with hundreds of brands competing against each other,
they want to introduce and dominate the 4thcategory, frozen dog food. Breeders Own Pet Food,
Inc.s product Breeders Mix, a blend of 85% federally inspected frozen fresh uncooked meat
and 15% high quality fortified cereal that will be marketed in the freezer section of supermarkets.
It will be the first pet food that is sold right next to human food. Food Brokers within the targeted
launch area, believe not only is this an untouched category but also the fact that Breeders Mix
is made with only high quality, all natural ingredients, makes Breeders Mix very appealing to
customers with their preference for natural pet foods now days. The company is targeting a 15%
return on sales during their introductory year.

Problem statement

Breeder's Own Pet Foods Inc. is planning to introduce a new frozen dog food product into the
market and requires a strategic marketing plan to launch the product successfully. There are
many concerns about how they should go about breaking into the retail channel, who to target,
how to promote their product with most of customers are not aware frozen dog food, how much
to allot to this initiative, and where to start selling their product. Breeders Own Pet Foods, Inc.
executives are carefully considering how to launch their Show Circuit brand dog food into the
greater Boston market and they must decide whether to accept or reject the proposed marketing
plan put forward by the Marketing Momentum Unlimited.

Dog food Market

U.S Market

In the year of 2011, dog food sales will climb to roughly $14 billion. This number only accounts
for the dogs that are fed prepared food on a regular basis. More than 50% of the dogs in the U.S.
do not consume prepared food regularly. Continued growth in the industry is dependent on the
perception of dog ownership. The number of dogs owned in the U.S. is currently 78.2million and
counting. As per the calculation illustrated in appendix 1a, an average dog owner will spend $179
on dog food annually. Supermarkets account for 36 percent of total dog food sales measuring
$5.04 billion and mass merchandisers account for the remaining 64 percent averaging $8.96
billion (appendix 1b. Out of the 64% of the sales of mass merchandisers, Walmart accounts for
25% ($3.5 billion), Pet Superstores (ex. PetSmart/PETCO) account for 20% ($2.8 billion),
Farm/Feed Stores account for 7% ($980 million), Veterinarians account for 6% ($840 million),
Internet Retailers and Independent Stores also account for 6% ($840 million) (appendix 1c).

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Boston Market

Boston consists of 1.2% of the total dog population in U.S, i.e. 1.2% of 78.2 million approximately
about 938,400 dogs. The total dog food sales for the Boston market can be approximated at 1.2%
of total dog food sales for the US market, i.e. 1.2% of $14 billion measuring $168 million. In Boston
area follows the same trend as the national market, supermarkets account for 36% of dog food
sales ($60.48 million) and mass merchandisers account rest of the 64% of sales ($107.52 million)
as shown in appendix 1d. Out of the mass merchandisers, Walmart accounts for 25% ($42
million), Pet Superstores (ex. PetSmart/PETCO) account for 20% ($33.6 million), Farm/Feed
Stores account for 7% ($11.76 million), Veterinarians account for 6% ($10.08 million) and Internet
Retailers and Independent Stores account for 6% ($10.08 million) (calculations shown in appendix
1e).

Four Major Trends Within Dog Food Industry

Increasing Dog Ownership

There are currently 78.2 million dog owners in the US and this number will continue to rise in the
coming years.

Pets as Family Members

Pet owners see their animal companions as a part of the family and assign human characteristics
to them. 75% of dog owners consider themselves mom and dad and 95% of dog owners pet and
hug their dog every day. As a result, dog owners in the US spend $25 billion a year on vet bills,
dog toys, dog medications, clothing, accessories, and furniture.

Premium and Super Premium Dog Foods

Increasing consumers preference for higher-quality which lead to formation of premium and
super premium dog food brands. This has also fueled the increase in dog food sales growth.

All Natural Dog Foods

There is an increasing trend in consumer preference for all-natural, no additives, no

preservatives, and vitamin and mineral enriched dog food products.

Despite the industrys growth, looking in to fact that only fewer than half of the dogs are regularly
fed dog food. Thus, it is understandable that the industry has it reached its full potential yet.

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Frozen Dog Food Industry

The frozen and refrigerated dog food accounts for 1% ($140 million) of US dog food sales. The
demand for frozen dog food is growing rapidly evidenced by the increase in dollar sales by 133%
in this category from 2008 to 2010.Research indicates that 1/10 dog owners regularly purchase
frozen/refrigerated dog food, i.e. 7.82 million dog owner purchase this product. More over,
Research also shows that an additional 15% of dog owners (11.73 million) are interested in trying
frozen/refrigerated food, but currently do not use it. Hence, it is clear there is growth potential
for this category of the dog food.

Number of Firms

In the US, there are approximately 50 dog food manufacturers and 350 dog food brands.
Although, the major five companies accounting for 75% of U.S. dog food sales: Nestle Purina Pet
Care, Iams, Hills Pet Nutrition, Master Foods USA, and Del Monte Foods. Nestle Purina Pet Care,
Master Foods USA and Del Monte Foods are most prominent brands in supermarket and mass
merchandisers channels. Whereas, Hills Pet Nutrition is prominent in pet stores and veterinarian
offices. Due to the intense competition and already established major five companies control
the 75% of the market, it is really difficult for a firm like Breeders Own Pet Foods, Inc. to compete
in this market with introduction of a new product (Breeders Mix) in frozen food section thats
generally not aware to the public. However, not many competitors in the frozen/refrigerated dog
food market Breeders Own Pet Foods, Inc. desires to enter.

Major sections of dog food market

The dog food market is divided into four main sections: Dry food, Canned food, Treats and
Frozen/Refrigerated Food.
Dry food

The most economic option for pet owners.

Approximately 95% of the dog owners feed their dogs dry food during the course of the
year.
Dry food accounts for 60% of total US dog food sales measuring $8.4 billion (appendix 2a).
In Boston market, it accounts for $100.8 million in sales (appendix 2b).

Canned food

Offered as a both complete food or supplement food.

Approximately 33.33% of owners feed their dogs canned food.
Canned food accounts for 20% ($2.8 billion) of U.S. dog food sales (appendix 2a).
In Boston market, it accounts for $33.6 million in sales (appendix 2b).
More expensive than dry food and treats.

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Treats

Not recommended for use as a complete food.

Approximately 80% of owners feed their dogs treats.
Treats account for 20% ($2.8 billion) of U.S. dog food sales as same as canned food
(appendix 2a).
In Boston market, it accounts for $33.6 million in sales (appendix 2b).

Frozen/Refrigerated Food

Approximately 10% of dog owners feed their dogs frozen/refrigerated food

Frozen/refrigerated food accounts for 1% ($140 million) of US dog food sales (appendix
2a).
In Boston market, it accounts for $1.68 million in sales (appendix 2b).
133% increase in dollar sales during the last three years.
This is a relatively untapped market with limited competitors.

Major players in each section

Dry food

The five major companies constitute 68% of market share in this category.
Private label stores account for 7% of market share and the rest of 25% is maintained by
the local and regional brands. Thus, it is clearly shows that the local and regional brands
are enjoying a fair amount of market share despite considering the intense competition
from big five.

Canned food

The national brands enjoy 88% of the market share in this section,20% higher than the
dry food category. Hence, it is utterly dominated by the five major ones.
Private label brands (8% market share) and the local & regional brands (4% market share)
are not all appealing to consumers in this category.

Treats

The national brands have 73% category share.

Private label brands make up 12% share and the rest 15% share by regional and local
bands.

Frozen food

There are only two notable competitors in this category is a frozen dog treat called frosty
paws made by Nestle Purina Pet care and Bil Jac, a frozen dog food sold in selected super

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 markets of Texas. Frosty paws will be only the main competitor for Breeders mix in
Boston market.

SWOT Analysis

Super-premium quality.
Recommended by professional show-dog owners.
Strengths Located next right to people food in supermarket.
All organic with no preservatives and additives.

Costly to produce.
Product requires thawing time and freezer space.
Lack of consumer appeal for frozen dog food.
Weaknesses Low margin for retailers.
Company has limited distribution resources.

Reported 133% increase in dollar sales in the frozen dog

market from 2008 to 2010.
Prepared dog food market has yet to be fully tapped.
Growth in premium and super premium dog food sales.
Growing popularity in organic and all natural dog foods.
Opportunities
Increased dog ownership within the United States.
Pets increasingly viewed as members of the family.
Opportunity to be first in Boston market.
Successful Boston market launch lays groundwork for national
launch.
Limited competitors in frozen food.

5 biggest dog food producers own 75% of market share.

Competitors heavily advertise.
Threats Dog owners are generally price sensitive.
Difficulties convincing retailers to provide freezer space.

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After evaluation of the SWOT analysis, it is clear that there are enough opportunities for the
company to capitalize on the dog food market with an overall trend of consumer preference for
high quality and all organic dog food with increase in number of dog owners over the years. In
addition, in frozen food market, there is only two notable competitors and this market is growing
at a high pace. Lack of appeal for frozen dog food among consumer is a major concern for the
company growth. However, Marketing experts have indicated that the problem of low appeal
can quickly be turned into an asset with the first dog food made to appeal only to dogs
marketing campaign. Due to the low margins for retailers for the product, the food brokers have
hardest task in their hand to convince supermarket frozen buyers that relatively low margins will
be offset by higher product turnover to provide freezer space. Hence, promotional and
advertising campaigns are key for the company in translating their weaknesses to strengths and
succeed in the business.

Alternatives
Breeder's Own Pet Foods, Inc. has three options in regards to adopting the introductory program
for the company's entry into the market
Alternative A: Accept $500,000 Marketing Proposal
Alternative B: Accept $700,000 Marketing Proposal
Alternative C: Reject Marketing Proposal
While analyzing the three alternatives, it is need to take into account the major concerns of the
executives.

Is market adequately defined and segmented?

The market seems to be well defined and segmented.
Single Adults and Married Couples that view their dog as part of their family. These
customers want to take care of their pets the best, willing to spend extra money for
that.
The company should target Singles and married, aged 21 54 with household income
greater than $25,000, with or without children, located in Boston area, and shop at
supermarkets. A high percentage of the target market is actively spending money on
their pets and those outside of target market are not actively spending money on their
pets as illustrated in appendix 3a and appendix 3b.
What is a reasonable estimate of market potential?
As stated before in the report, 10% of dog owners (1 in 10) or approximately 7.82
million people currently purchase frozen / refrigerated dog food and 15% of dog
owners or approximately 11.73 million are interested in purchasing frozen/refrigerated
dog food in the U.S market (appendix 3c).

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 An average dog owner spends $17.90 on frozen dog food product annually (appendix
3d).
Boston market constitutes 1.2% of total US dog population or 938,400 dogs which
accounts a total of $ 168,000,000 dollars spend on dog food (appendix 3d).
Total dollars spent in Boston Supermarkets is $60,480,000 (appendix 3d)
Total dollars spent on refrigerated dog food in Boston (1% of the total dollar sales) is
approximately $1,680,000 (appendix 3d). Thus, a reasonable estimation of market
potential for frozen dog food in Boston market is $1,680,000.
Can the food brokers get distribution in supermarkets given the sales program?
In order to attain freezer space in Boston supermarkets, two key problems must be over come:
Persuading the frozen-food buyer to stock Breeder's Mix and that a greater product
turnover will make up for a potentially lower margin of the product.
Breeder's Mix will be placed right next to the people food. However, the idea wont be
completely new to the supermarket or consumer thanks to Frosty Paws, a similar
product by Nestl Purina Pet Care currently in the market.
Given the potentially lower margin and likelihood of failure (80% of new product failure),
slotting fees of approximately $30,000 will be required to gain distribution in the supermarket.
What should be the recommended selling list price to the consumer for Breeder's Mix?
Since Breeder's Mix is a high quality product with no preservatives and additives, it should be
priced at relatively higher. However, it needs to make sure that it shouldnt be priced so high
as to price itself out of the market.
Industry average price per pound can be estimated at $2.28 per pound of dog food
(appendix 4a).
Bill Jac currently sells their product between $1.30 and $1.80 per pound (appendix 4b).
By analyzing the current market, Breeder's Mix suggested list price should be
between$2.00 - $3.00 per 1lb bag.
The average price per pound of treats would not be not taken into account to price the
product since treats are viewed as a special, infrequent purchase, while, Breeder's Mix is
a staple item which purchased regularly.

Can the company achieve a 15% return of sales in its introductory year?

Breeder's Mix can achieve a 15% return of sales if full market potential is achieved. If
full market potential is reached, $1,680,000 will be spent on frozen food.
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 Assuming a $2.50 retail selling price and 22% Supermarket gross margin, manufacturing
price will be $1.95 per lb. (appendix 5a).
At a $1.95 manufacturing Selling Price, total dollar sales of $1,680,000 would translate
into 861,539 units sold (appendix 5a) and net income will be $967,374 before
advertising expenditures (appendix 5b)
If proposed advertising and promotional plan with cost of $500,000 is employed, return
on sales would be approximately 27.81% (appendix 5c).
If proposed advertising and promotional plan with cost of $700,000 is implemented,
return on sales would be approximately 15.92% (appendix 5d).

Evaluating The Alternatives

While evaluating the alternatives, it should take into consideration of benefits, drawbacks and
potential sales needed to make break even.
Alternative A: Accept $500,000 Marketing Proposal
Benefits
Breeder's Own will be able to launch product as scheduled, and will serve as basis for
national launch.
Advertising has potential to generate $25,000,0000 in sales (appendix 5e).
Market share and sales needed to make break even
In order to make breakeven sales, Breeder's Mix will need to obtain a .53% market
share of total Dog Food Sales in Boston (appendix 5e).
In order to breakeven sales, Breeder's Mix will need to obtain a 1.48% market share of
total Dog Food Super Market Sales in Boston (appendix 5e).
Breeder's Mix must sell 459,471 units to breakeven (appendix 5e).
Breeder's Mix must have 53% of market potential purchase the product to breakeven
in sales (appendix 5e).
Alternative B: Accept $700,000 Marketing Proposal
Benefits
Breeder's Own will be able to launch product as scheduled, and will serve as basis for
national launch.
Advertising has potential to generate $35,000,0000 in sales (appendix 5f).

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Market share and sales needed to make break even
In order to breakeven, Breeder's Mix will need to obtain a .73% market share of total
Dog Food Sales in Boston (appendix 5f).
In order to breakeven, Breeder's Mix will need to obtain a 2.03% market share of total
Dog Food Super Market Sales in Boston (appendix 5f).
Breeder's Mix must sell 632,857 units to breakeven (appendix 5f).
Breeder's Mix must have 73% of market potential purchase the product to breakeven
sales (appendix 5f).
Alternative C: Reject Marketing Proposal
Benefits
Eliminate advertising cost completely and gain opportunity to generate new and better
marketing proposal.
Drawbacks
Postpone launch of new product, must use additional funds and time to generate new
marketing plan, and inability to gain entrance into supermarkets.

Recommendation
My recommendation would be to accept the $500,000 marketing proposal (with $30,000
slotting fee). As per data available, the Boston market follows the US market, the
frozen/refrigerated dog food market contribute 1% of total dog food sales, the reasonable
market potential would be $1,680,000 as stated earlier. Breeder's Mix need to obtain 53% of
the market share (in frozen food market) in order to reach break even point. Since Breeder's
Mix will have no direct competitors (only competitor Frozen Paws) to compete with for the 1%
market share in Boston, it is likely that Breeder's Mix can reach breakeven without much
difficulty. Moreover, the company would make 28% return on sales (appendix 5e) by adopting
this plan if able to achieve the full market potential.
In contrast, if the company decided to go with $700,000, it will be only able to deliver 15.92%
return on sales. In addition, this proposal poses more risk and greater losses for the company
in the event of failure.
All estimations are done assuming a maximum of 1% market share for frozen dog food market.
Since the dog owners are becoming more willing to spend extra to purchase quality items for

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their pets, the Breeders mix has a huge potential to attract those customers with its high
quality and healthy nature. Subsequently, it can also attract customers to switch from dry food
and canned food to their product and gain more market share outside of the frozen food
market.
As mentioned previously, the average dog owner spends only approximately $17.90 annually
on frozen dog food. This clearly indicates that customers view it as special purchase that is not
part of their repeated purchase. Thus, Breeders Own Pet foods, Inc. has the opportunity to
change this perception and persuade dog owners to regularly purchase their product. By
changing this perception, the average annual dollar amount spent on frozen dog food will
increase. As per research, another 15% of dog owners are interested to buy frozen dog food
who are not currently buying it. The company has the opportunity to persuade these
customers to purchase their product and increase their market share.
By approving the current marketing proposal, the product will be launched on schedule. If the
marketing proposal were denied, a new proposal would be needed. Breeder's Own would run
the risk of other competitors entering the marketing during this time.

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Appendix
Appendix 1a. Average annual spending per dog

Average annual spending per dog = Total dog food sales / owned dog population

= 14,000,000,000 / 78,200,000 = $179.028 per dog

Appendix 1b. Distribution of dog food sales in U.S market

Distribution Channel Percentage of Sales Dollar Sales

Super market 36% $5.04 billion (14 billion x 36%)

Mass Merchandisers 64% $8.96 billion (14 billion x 64%)

Appendix 1c. Dog food sales by Mass Merchandisers (U.S Market)

Distribution Channel Percentage of Sales Dollar Sales

Walmart 25% $3.5 billion (14 billion x 25%)

Pet Superstores 20% $2.8 billion (14 billion x 20%)

Farm/ Feed Stores 7% $980 million (14 billion x 7%)

Veterinarians 6% $840 million (14 billion x 6%)

Internet and independent 6% $840 million (14 billion x 6%)

retailers

Appendix 1d. Distribution of dog food sales in Boston market

Total sales = 1.2% x 14 billion = 168 million

Distribution Channel Percentage of Sales Dollar Sales

Super market 36% $60.48 million (168 million x 36%)

Mass Merchandisers 64% $107.52 million (168 million x 64%)

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Appendix 1e. Dog food sales by Mass Merchandisers (Boston market)

Distribution Channel Percentage of Sales Dollar Sales

Walmart 25% $42 million (168 million x 25%)

Pet Superstores 20% $33.6 million (168 million x 20%)

Farm/ Feed Stores 7% $11.76 million (168 million x 7%)

Veterinarians 6% $10.08 million (168 million x 6%)

Internet and independent 6% $10.08 million (168 million x 6%)

retailers

Appendix 2a. Sales distribution of various sections in U.S market

Product Percentage of Sales Dollar Sales

Dry food 60% $8.4 billion (14 billion x 60%)

Canned food 20% $2.8 billion (14 billion x 20%)

Treats 20% $2.8 billion (14 billion x 20%)

Frozen/ Refrigerated 1% $140 million (14 billion x 1%)

Appendix 2b. Sales distribution of various sections in Boston market

Product Percentage of Sales Dollar Sales

Dry food 60% $100.8 million (168 million x 60%)

Canned food 20% $33.6 million (168 million x 20%)

Treats 20% $33.6 million (168 million x 20%)

Frozen/ Refrigerated 1% $1.68 million (168 million x 1%)

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Appendix3a. Target market(Demographics)

Target Group Percentage of income spent on pets

Parents with school-age children 79%

Parents with younger or older children 71%

Roommate households 72%

Young couples with no children 73%

Household with annual income greater than 63%

$50,000

Appendix 3b. Demographic group outside of target market

Demographic outside of target market Percentage of income spent on pets

Older singles 30%

Retired couple 41%

Household with annual income less than 48%

$25,000

Appendix 3c.

Assume that 1 dog = 1 dog owner, thus, 10% of dog owners currently purchase frozen/refrigerated food.
Therefore, 78.2 million total dog owners x 10% = 7.82 million people
It is also known that 15% of dog owners are interested in trying frozen/refrigerated dog food.
Hence, 78.2 million total dog owners x 15% = 11.73 million people

Appendix 3d.

Total money spent on frozen dog food / Total owners who buy frozen dog food = $140,000,000 /
7,820,000 = $17.90
$14,000,000,000 x 1.2% = $168 million (Boston sales)
$168,000,000 total Boston dog food sales x 36% spent in supermarkets = $60,480,000
Therefore, $168,000,000 total Boston dog food sales x 1% estimated market share for frozen dog food =
$1,680,000 spent on frozen dog

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Appendix 4a. Price per pound of different brands

Product Category Product Name List Price Price Per Pound

Dry food Dog Chow $14.99/17.6 lbs. $0.85
Dry food Purina One $13.49/8 lbs. $1.69
Dry food Iams $19.45/8 lbs. $2.43
Canned food Alpo Prime Cuts $1.50/22 oz. $1.09
Canned food Mighty Dog $.80/5.5 oz. $2.33
Canned food Cesar Select $1.09/3.5 oz. $4.98
1 oz. = 0.0625 lbs.
Average price of all six brands = 13.37/6 = 2.28

Appendix 4b. Price per pound of Bil Jac

Product Category Product Name List Price Price Per Pound

Frozen food Bil Jac $3.59/ 2 lbs. $1.795
$6.49/5 lbs. $1.23

Appendix 5a. Supermarket margin

Gross Margin = Retail Selling Price - Retail Cost of Goods Sold /Retail Selling Price
.22 = $2.50 - COGS/$2.50
COGS = 2.50 - .55
COGS = $1.95 (retailers COGS becomes the manufacturers SP)

Therefore, potential dollar sales divided by manufacturing selling price gives us the number units to be
sold.
1,680,000 total sales/ $1.95 per unit = 861,539 units

Appendix 5b.Net income before advertising

Net income before advertising =Total sales stocking fee Variable Cost commission
= $1,680,000 - $30,000 - $565,026 - $117,600 = $967,374

Variable cost = $7.87/12 bags per case x 861,539 units = $565,026

Broker Commission = .07 x $1,680,000 = $117,600

Appendix 5c.Net income and Return on sales after plan A ($500,000 advertising)

Net income before interest and tax = $967,374 500,000 = 467,374

Return on sales (ROS) = Net income before interest and tax/ total sales

= 467,374/$1,680,000 = 27.81%

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Appendix 5d.Net income and Return on sales after plan B ($700,000 advertising)

Net income before interest and tax = $967,374 700,000 = 267,374

Return on sales (ROS) = Net income before interest and tax/ total sales

= 267,374/$1,680,000 = 15.92%

Appendix 5e. Break even and contribution margin for plan A

Assuming total spending for advertising in the dog food industry is about 2% of sales:
$500,000 / 2% = $25,000,000 sales
Assume FC = $530,000 (advertising proposal + slotting fees), manufacturing SP = $1.95
VC = VC per 1 lb bag +7% sales commission per 1 lb bag
= 7.87/12 + 1.95 x .7 = .66 + .1365= 0.7965

Contribution Margin Ratio = (Sales VC) / Sales

= (1.95 - .7965) / 1.95 = .591
Breakeven in Sales = Fixed Cost / Contribution Margin Ratio
$BE = $530,000 / .591 = $896,785
Market Share needed = $BE/Total Boston Dog Food Sales
MK Share = $896,785 / $168,000,000 = 0.53%
Market Share needed = $BE/Total Boston Supermarket Sales
MK Share = $896,785/ $60,480,000 = 1.48%
BE as % of Market Potential = $BE/$Market Potential (Boston market)
BE = $896,785/$1,680,000 = 53%
Breakeven in Units = Fixed Cost/ (Unit Selling Price - Unit Variable Cost)
Unit BE = $530,000/ (1.95 - .7965) = 459,471 units

Appendix 5f. Break even and contribution margin for plan A

Assuming total spending for advertising in the dog food industry is about 2% of sales:
$700,000 / 2% = $35,000,000 sales
Assume FC = $730,000 (advertising proposal + slotting fees), manufacturing SP = $1.95
VC = VC per 1 lb bag +7% sales commission per 1 lb bag
= 7.87/12 + 1.95 x .7 = .66 + .1365= 0.7965
Contribution Margin Ratio = (Sales VC) / Sale = (1.95 - .7965) / 1.95 = .592
Breakeven in Sales = Fixed Cost / Contribution Margin Ratio
$BE = $730,000 / .592 = $1,233,108
Market Share needed = $BE/Total Boston Dog Food Sales
MK Share = $1,233,108 / $168,000,000 = 0.73%
Market Share needed = $BE/Total Boston Supermarket Sales
MK Share = $1,233,108 / $60,480,000 = 2.03%
BE as % of Market Potential = $BE/$Market Potential
BE = 1,233,108/$1,680,000 = 73%
Breakeven in Units = Fixed Cost/ (Unit Selling Price - Unit Variable Cost)
Unit BE = $730,000/ (1.95 - .7965) = 632,857 units

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