JJ sells jars of jam. It currently sells about 20M jars a year at a price of $2.
ID: 2752656 • Letter: J
Question
JJ sells jars of jam. It currently sells about 20M jars a year at a price of $2.00 per jar. It is introducing a new range of low calorie jams. This new line of jams is expected to sell 4M units per year at the same price. Of these 4M units 40% will come from new sales, and the remainder will be from existing customers changing from the old jam to the new (healthier) Jam. Suppose that 70% of people who switch to the new jam from the old jam would have gone to a competitor if BB had not introduced the healthier line. What level of incremental dollar sales is associated with the new line of jams?
Explanation / Answer
Solution:
Sales from Remaining 30% of Customer who remain with New line of Jam = 48,00,000 - 33,60,000
= 14,40,000
Therefore Total incremental Sales = Sales from New customer + Sales from Remaining 30% Customer who reian with new line of Jam
= $ 32,00,000 + $ 14,40,000
= $ 46,40,000
Existing Sales (20,000,000 x $2) $400,000,000 Sales from New Line of Jam (40,00,000 x $2) $ 80,00,000 Sales from New Customer (40% of $80,00,000) $ 32,00,000 Sales from Existing Customer who switch to new Jam(60% of $80,00,000) $ 48,00,000 70% of customer who switch to new Jam goes to competitor (70% of $ 48,00,000) $ 33,60,000Related Questions
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