Question
DuPont currently offers 2 specialty kinds of plastics, Premium and General Purpose. Data for the two products are as follows: Premium: 250,00 (sales volume) $30,000,000
DuPont currently offers 2 specialty kinds of plastics, Premium and General Purpose. Data for the two products are as follows:
Premium: 250,00 (sales volume) $30,000,000 (sales revenue) $15,000,000 (COGS)
General: 1,000,000 (sales volume) $60,000,000 (sales revenue) $25,000,000 (COGS)
Dupont is planning on introducing an economy product at a price of $30/ton and variable costs (COGS) of $15.5/ton. Assume that cannibalization will occur proportionately to the current product volume share. Also, assume that the new product has zero fixed costs. What is the breakeven cannibalization rate?
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