A company sells bagels. It currently sells about 2,000 million bagels a year at

Question

A company sells bagels. It currently sells about 2,000 million bagels a year at a price of $1.10 per bagel. It is introducing a new range of whole-wheat bagels – raisin, cranberry and walnut, etc. This new line of bagels is expected to sell 350M units per year at the same price. Of these 350M units 30% will come from new sales, and the remainder will be from customers changing from MM’s old bagels to the new (healthier) whole-wheat bagels. Suppose that 40% of people who switch to the new bagels from MM’s old bagels would have gone to a competitor if MM had not introduced the healthier line. What level of incremental dollar sales is associated with the new line of bagels (pick closest answer)?

Explanation / Answer

Bagels/year 2000 New bagels/year 350 Price/unit 1.1 Price/unit 1.1 Demand Switch 245 New Customers 105 Competitor loss 98 Old Customers 245 Balance switch 147 Incremental Sales is defined as sales if new bagels were not introduced and sales when new bagels have been introduced Sale of old bagels Units Sales when new bagels were not introduced 1902 2000-.4*245 Sales when new bagels have been introduced 1755 2000-245 Incremental Units sold -147 New bagels sold 350 Total incremental units 203 Total incremental sales 223.3

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.