Read the following New Case for Assessment of Cannibalization: Ignore all prior figures

Kann Inc. manufactures and sells high quality skateboards in Northern California. Kann Inc. sold 5,000 AK1 models at $150 each and 3,000 AL2 models at $200 each last year. The company expects to launch and sell 1,000 AM3 models this year. Fifty percent of AM3 sales volume is expected to come from other models already being manufactured by Kann Inc. (30 percent from AK1 models and 70 percent from AL2 models). Kann Inc.s AM3 would be sold to retailers for $300. AM3s variable cost per unit is $150. Kann Inc. will incur no additional fixed costs to add its new AM3 model into the line.

Tips for solutions: Show all the detailed steps of assessment of cannibalization. First, compute the total contribution ($) of the original product line of AK1 & AL2. Then, compute how many AK1 and AL2 models will be cannibalized. Then, compute the total contribution ($) for the three models altogether with the changed demands for AK1 & AL2 and AM3 demand.

3.1 3.5: Fill in the table.

[Current Cost structure of the skateboards at Kann Inc.]

	Unit Selling Price	Total Variable Costs per Unit (= COGS)	Unit Contribution ($)	Demand per Year (Units) (= Sales Volume per year)	Total Contribution ($) (= Gross Margin)
AK1 model	$150.00	$90.00	3.1) $_____________	5,000	3.3) $_______________
AL2 model	$200.00	$120.00	3.2) $_____________	3,000	3.4) $_______________
Grand Total	N/A	N/A	N/A	8,000 (= 5,000 + 3,000)	3.5) $_______________