Universal Sporting Equipment (USE), Inc , must decide whether to introduce a mid priced version of the firm's Endeavor line of high performance recreational bicycles next year The new model (E 330) has a unit variable cost of $180, and will be sold to retailers at a price of $430 Projections made by the product development team indicate that, if introduced E 330 will achieve a sales volume of 60 000 units next year, its first year of commercialization Thirty percent (30 ) of the E 330's first year's sales volume is expected to come from competitors products and market growth, and the remaining seventy percent (70 ) is expected to come from two models currently sold by USE Sixty percent (60 ) of the cannibalized volume will come from the higher priced E 660 model, which has a unit variable cost of $250 and is sold to retailers for $680 The remaining forty percent (40 ) of cannibalized volume will come from the economy priced E 220 model, which is sold to retailers for $280 and has a unit variable cost of $120 If E 330 is not introduced, sales of the existing models next year are expected to be 50,000 units for E 660 and 80,000 units for E 220 The fixed costs of launching E 330 have been forecasted to be $1,000,000 Answer the following, showing calculations What is the cannibalization rate (Determine the actual rate, not the definition) (1 pts) How many units of E 220 will be cannibalized (3 pts) How many units of E 660 will be cannibalized (3 pts) How many incremental units of E 330 will be sold (3 pts) Should Ms Coleman add the E 330 model to the product line Why Jane Coleman, Brand Manager for Universal Sporting Equipment (USE), Inc , must decide whether to introduce a mid priced version of the firm's Endeavor line of high performance recreational bicycles next year The new model (E 330) has a unit variable cost of $180, and will be sold to retailers at a price of $430 Projections made by the product development team indicate that, if introduced E 330 will achieve a sales volume of 60,000 units next year, its first year of commercialization Thirty percent ( 30 ) of the E 330's first year's sales volume is expected to come from competitors' products and market growth, and the remaining seventy percent (70 ) is expected to come from two models currently sold by USE Sixty percent (60 ) of the cannibalized volume will come from the higherpriced E 660 model, which has a unit variable cost of $250 and is sold to retailers for $680 The remaining forty percent (40 ) of cannibalized volume will come from the economy priced E 220 model, which is sold to retailers for $280 and has a unit variable cost of $120 If E 330 is not introduced, sales of the existing models next year are expected to be 50,000 units for E 660 and 80,000 units for E 220 The fixed costs of launching E 330 have been forecasted to be $1,000,000 Answer the following, showing calculations a) What is the cannibalization rate (Determine the actual rate, not the definition) ( I pts) b) How many units of E220 will be cannibalized ( 3 pts) c) How many units of E 660 will be cannibalized (3 pts) d) How many incremental units of E 330 will be sold ( 3 pts) e) Should Ms Coleman add the E 330 model to the product line Why (10 pts)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 03, 2024

Universal Sporting Equipment (USE), Inc., must decide whether to introduce a mid-priced version of the firm's Endeavor line of high-performance recreational bicycles next year. The

Universal Sporting Equipment (USE), Inc., must decide whether to introduce a mid-priced version of the firm's Endeavor line of high-performance recreational bicycles next year. The new model (E-330) has a unit variable cost of $180, and will be sold to retailers at a price of $430. Projections made by the product development team indicate that, if introduced E-330 will achieve a sales volume of 60.000 units next year, its first year of commercialization.

Thirty percent (30%) of the E-330's first year's sales volume is expected to come from competitors products and market growth, and the remaining seventy percent (70%) is expected to come from two models currently sold by USE. Sixty percent (60%) of the cannibalized volume will come from the higher-priced E-660 model, which has a unit variable cost of $250 and is sold to retailers for $680. The remaining forty percent (40%) of cannibalized volume will come from the economy-priced E-220 model, which is sold to retailers for $280 and has a unit variable cost of $120.

If E-330 is not introduced, sales of the existing models next year are expected to be 50,000 units for E-660 and 80,000 units for E-220. The fixed costs of launching E-330 have been forecasted to be $1,000,000.

Answer the following, showing calculations.

What is the cannibalization rate? (Determine the actual rate, not the definition) (1 pts)
How many units of E-220 will be cannibalized? (3 pts)
How many units of E-660 will be cannibalized? (3 pts)
How many incremental units of E-330 will be sold? (3 pts)
Should Ms. Coleman add the E-330 model to the product line? Why?

Jane Coleman, Brand Manager for Universal Sporting Equipment (USE), Inc., must decide whether to introduce a mid-priced version of the firm's Endeavor line of high-performance recreational bicycles next year. The new model (E-330) has a unit variable cost of $180, and will be sold to retailers at a price of $430. Projections made by the product development team indicate that, if introduced E-330 will achieve a sales volume of 60,000 units next year, its first year of commercialization. Thirty percent ( 30%) of the E-330's first year's sales volume is expected to come from competitors' products and market growth, and the remaining seventy percent (70%) is expected to come from two models currently sold by USE. Sixty percent (60%) of the cannibalized volume will come from the higherpriced E-660 model, which has a unit variable cost of $250 and is sold to retailers for $680. The remaining forty percent (40% ) of cannibalized volume will come from the economy-priced E-220 model, which is sold to retailers for $280 and has a unit variable cost of $120. If E-330 is not introduced, sales of the existing models next year are expected to be 50,000 units for E-660 and 80,000 units for E-220. The fixed costs of launching E-330 have been forecasted to be $1,000,000. Answer the following, showing calculations. a) What is the cannibalization rate? (Determine the actual rate, not the definition) ( I pts) b) How many units of E220 will be cannibalized? ( 3 pts) c) How many units of E-660 will be cannibalized? (3 pts) d) How many incremental units of E-330 will be sold? ( 3 pts) e) Should Ms. Coleman add the E-330 model to the product line? Why? (10 pts)