A local veggie chip company, VegEats, is introducing a low-fat, low-sodium option to complement their standard veggie chips. Management for VegEats estimated that for this new low-fat, low-sodium chip option, they would have a variable cost of $0.35 on the $3.60 selling price they are considering. They project that they would sell 140,000 units of these new chips in the first year. This is in addition to the current veggie chip offering, of which 175,000 units are sold at a price $3.49. Each unit of these existing chips carries a variable cost of $0.30 per unit.

VegEats projects a 54% cannibalization rate. What would be the overall projected yearly profit for VegEats if this new low-fat, low-sodium chip is introduced?

Answer: $772,086

Break-Even

1. VegEats management also needed to determine how much sales revenue would be required to ensure profitability after taking into account all of the company expenses. Using the price ($3.75) and cost figures ($0.60 variable cost) for the new low-fat, low-sodium chips given in the previous question, how much sales revenue would be required to break-even if VegEats has $317,250 in overhead?