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  3. assume a company expects to sell 2 million package

Assume a company expects to sell 2 million packages of Pop-Tarts Gone Nuttyl in the...

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Accounting

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Assume a company expects to sell 2 million packages of Pop-Tarts Gone Nuttyl in the first year after introduction but expects that 90 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 Nuttyl is $1.15 and its variable cost is $0.45, when the price for a package of original Pop-Tart is $0.95 with variable cost of $0.20. 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 $300,000 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.)

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