Pop-1 Nutty! $0.50 cannibalized $0.10 Unit contribution $0.60 Contribution lost due to cannibalization is $ -630,000 (Round to the nearest dollar) Contribution due to net new volume is S. (Round to the nearest dollar)
Pop-1 Nutty! $0.50 cannibalized $0.10 Unit contribution $0.60 Contribution lost due to cannibalization is $ -630,000 (Round to the nearest dollar) Contribution due to net new volume is S. (Round to the nearest dollar)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Hw.33.
Transcribed Image Text:Assume a company expects to sell 7 million packages of Pop-Tarts Gone Nutty! in the first year after introduction but
expects that 90 percent of those sales will come from buyers who would normally purchase existing Pop-Tart flavors
(that is, cannibalized sales). The price for a package of Pop-Tarts Gone Nutty! is $1.15 and its variable cost is $0.65,
when the price for a package of original Pop-Tart is $0.90 with variable cost of $0.30. Assuming the sales of regular
Pop-Tarts are normally 300 million packages per year and that the company will incur an increase in fixed costs of
$600,000 during the first year to launch Gone Nutty! will the new product be profitable for the company?
Determine the unit contributions and the loss for every package cannibalized from the original product. (Round to the
nearest cent.)
Unit contribution
original
Pop-Tarts
$0.60
Pop-Tarts Gone
Nutty!
$0.50
Loss for every
package
cannibalized
$0.10
Contribution lost due to cannibalization is $ -630,000 (Round to the nearest dollar)
Contribution due to net new volume is S
(Round to the nearest dollar)
N
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