Reference no: EM132392133

Kellogg's, maker of? Pop-Tarts, recently introduced? Pop-Tarts Gone? Nutty! The new product includes flavors such as peanut butter and chocolate peanut butter. Although the new Gone? Nutty! product will reap a higher wholesale price for the company

?($1.25 per? eight-count package of the new product versus $1.10 per package for the original? product), it also comes with higher variable costs ?($0.60 per? eight-count package for the new product versus $0.25 per? eight-count package for the original? product). Assume the company expects to sell 4 million packages of? Pop-Tarts Gone? Nutty! in the first year after introduction but expects that 75 percent of those sales will come from buyers who would normally purchase existing? Pop-Tart flavors? (that is, cannibalized? sales). Assuming the sales of regular? Pop-Tarts are normally 310 million packages per year and that the company will incur an increase in fixed costs of $350,000 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.)