Assume a company expects to sell 6 million packages ofPop-Tarts Gone Nutty! in the first year after introduction but expects that 40 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 GoneNutty! is $1.30 and its variable cost is $0.60, when the price for a package of original Pop-Tart is $1.10 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 $700,000 during the first year to launch Gone Nutty! will the new product be profitable for thecompany?

ANSWER THE QUESTIONS BELOW PLEASE:

1. Determine the unit contributions and the loss for every package cannibalized from the original product. (Round to the nearest cent.).

Original Pop-Tarts: $____ Unit Contribution

Pop-Tarts Gone Nutty!: $ ___ Unit Contribution

Loss for every package cannibalized: $ ___ Unit Contribution

2. Contribution Lost due to Cannibalization is $_____. (Round to the nearest dollar).

3. Contribution due to Net New Volume is $____. (Round to the nearest dollar).

4. The increase in total contribution is $____. (Round to the nearest dollar).

5. Introducing the new profit __Should/Should Not__ be profitable.

Assume a company expects to sell 6 million packages of Pop-Tarts Gone Nutty! in the first year after introduction but expects that 40 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 utty! is $1.30 and its variable cost is $0.60, when the price for a package of original Pop-Tart is $1.10 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 $700,000 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.) original Pop-Tarts Pop-Tarts Gone Loss for every package Nutty! cannibalized $ $0 Unit contribution $