Cannibalization Exercise #2 A company has a single product that sold 1,000 units in the previous period. The company plans to introduce a new product that will sell 500 units with a cannibalization rate of 50%. 1. How many units of each product should the company expect to sell in the coming period? How many units in total? Cannibalization rate=(sales lost from existing products)/ sales of new product Now assume the following: Selling price Existing product $10 Variable Cost $5 New product $15 $11 2. Assuming the 50% cannibalization rate, should the company introduce the new product? Why/not? Margin on Existing product: units* (price-VC) = Margin on New Product: units*(price-VC) = 3. If the cannibalization rate increases to 70%, should the company introduce the new product? Why/not? 70%=x/500 x=?? sales lost from new product Old product sales: New product sales: Total 1150 units = Margin on Existing product: units* (price-VC) = Margin on New Product: units* (price-VC)| 4. What other factors would need to be considered?