Question

The company expects to sell 50,000 cases of Crunchies Zest in year one. Of that amount, it is estimated that 20,000 cases will be diverted from Crunchies Lite, of which the company had expected to sell 70,000 cases. A. Calculate the total contribution margin for Crunchies Lite, assuming

Answer 1

Solution Particulars Estimation Sell wilhoul Ciuchies Lile (In Cases) Estimation Sell with Crucnhies Lite (In Cases) SP Unil V.C/Unit Cont/Unit Crunchies Zost Crunchies Lite | 70000 7cxxoo 500cxol 11. 25 9 .95 7 .5 6.5 3.75 3.45 1 Answer A Tolal Corul marging of Cruciny Lile assuming Crunchy Zest was not introduced =Cont Per Unil'Eslimaled Salesin cases =D6*D2 241500 Ans Answer B Overall Cont Margin of Crunchies Lite assuming News Brand Intro as Planned =Cont PerUnit Estimated Salesin cases after Introduction of Ze51 =D6*D3 172500 Ans Answer Toatl Cant magn af Crucnhies Zesty =Cont Per Unit Estimated Salasin cases =C8*C3 262500 Ans Answer D Change in Crunchics Total Contribution Margin after intro of Zos! = Total Cont margin bcforc Intro of Zest - Tota Cont after Intro of Zest Total Cont Margin of Crucnhics bcforc Zost (assurring only litc was there) (A) =Cont Per Unit Estimatcd Salcsin cascs =D6'02 241500 Tolal Coil Margin or Crucnhies aller Zest (assuming lile and Zest bolh were there) (B) =Coni Per Unil'Eslimaled Salesin cases for Zesi+ Conl Per Unil'Eslimaled Sales for Lile aller inli or Zes ={c3*C6)+(03-06) 435000 Therefore Change In Crunchies total Cont Margin(B-A) 193500 Ans Answer E Should Crunchy go ahead with Zest Introduction? Crunchy should go ahed with Zost introduction becausc it Icads to Incrcmcntal Coni Margin to Crunchies to the tunc of 193500 (As shown in Answer Dabove) Conclusion One should go ahead for Introduction of Zest if it leads to Incremental Cont Marpin