Do recommend introducing or not introducing extrafood

Assignment Help Accounting Basics

Reference no: EM132479618

FI is planning to introduce a new product called ExtraFood at a retail price of $5 per unit using the same retailer (the marketing margin of the retailer is still 15%) and broker (brokerage fee is still 5% of retail price per unit sold). ExtraFood's manufacturing cost is $1.50 per unit. In order to introduce ExtraFood, FI would incur additional fixed costs of $4,000,000 per year (e.g. research and development, advertising, depreciation on new equipment). Demand for the new product is estimated to be 2 million units, 45% of which is expected to come from SuperFood.

Question a) Do you recommend introducing or not introducing ExtraFood?

BEV= fixed cost/ (unit cont new-(% decrease in sales current unit cont current)

=$4,000,000/ (5-1.5*1.05-0.45*2.95)

= 1,907,032

So the BEV is smaller than the estimate sale units. So FI could make a profit from the new product. So would recommend introducing ExtraFood.

Question : How do you get these values in the formula (unit cont new-(% decrease in sales current * unit cont current)?

Reference no: EM132479618

Questions Cloud

Estimate the minimum sample size : Estimate the minimum sample size required to estimate the population mean with the stated accuracy. Whats the required sample size?

What is the amount skysong will receive on the sale : Skysong Inc. loans money to John Kruk Corporation in the amount of $656,000. What is the amount Skysong will receive on the sale

What evidence should be collected to test the controls : Assess the controls in place for thoroughness, applicability, etc. using the elements of the case study. What evidence should be collected to test these control

Independent of scaling factors : Use SPSS to demonstrate that Pearson r is independent of scaling factors.

Do recommend introducing or not introducing extrafood : How do you get these values in the formula (unit cont new-(% decrease in sales current * unit cont current)? Do recommend introducing Extra food

Discuss fraud and major laws and regulations : Discuss fraud and major laws and regulations that pertain to IT functions related to fraud. What might exempt an organization from a law or regulation?

Write an essay of the effects of sleep deprivation : Write an essay of The effects of sleep deprivation - Include an introduction with a thesis statement and a conclusion

What is bring your own device : Using the 3 paragraph structure described in the announcements, please research and explain what is Bring Your Own Device, explain just 1 reason for allowing.

Significance level to test the? principal claim : Use a 0.05 significance level to test the? principal's claim that illegal drug use in her school is below the current national average.

User Account

All Pages