8.There is excitement in the air! The new UltraGuard flea collar is about to be

Question

8.There is excitement in the air! The new UltraGuard flea collar is about to be introduced to the market. The collar will feature enhanced protection, increased longevity and is environmentally friendly. It will be priced at $9.99 and has unit variable costs of $4.25. The company expects to sell 49,050 UltraGuard collars during the next six months. Some of the sales will come at the expense of the current product, the PetArmor collar, priced at $6.99 with variable costs of $3.45. Projected sales for the PetArmor collar are 95,000 units (without the introduction of the UltraGuard). The market analyst estimates that the UltraGuard collar will cannibalize 18,850 PetArmor collars during the introductory 6 month period.

Calculate the cannibalization rate. Report your answer as a WHOLE NUMBER, ROUNDED TO 1 DECIMAL PLACE.

ANSWER IS 38.4 SHOW ME HOW TO SOLVE IT

Explanation / Answer

Cannibalization rate is the loss sustain from older product due to introduction of a new product is called the cannibalization rate.

Cannibalization rate =( Sales lost from existing products/ Sales of new product ) x 100

Sales lost from existing products = 49,050 - 18,850 = 30,200 units

Sales of new products = 95,000 Units

Cannibalization rate = 30,200 / 95,000 x 100 = 31.79%

Hence, Cannibalization rate is 31.79%

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