(Identifying incremental revenues from new products) Morten Food Products, Inc., is a regional manufacturer of salty food snacks. The firm competes directly with the national brands including Frito-Lay—but only in the southeastern part of the United States.

Next year Morten expects total revenues of $300 million from its various chip products.

Moreover, a new line of baked chips is expected to produce revenue of $60 million.

However, the firm’s analysts estimate that about 60 percent of this revenue will come from existing customers who switch their purchases from one of the firm’s existing products to the new, healthier baked chips.

a. What level of incremental sales should the company analyst attribute to the new line of baked chips?

b. Assume that some of Morten’s existing customers are actively looking for a healthier snack alternative and will move to another company’s baked chip offering if Morten does not introduce the new product. How would the loss of chip revenue due to the defection of Morten customers to other brands affect your analysis of incremental sales? Discuss (no computations required).