Question

PLEASE EXPLAIN WITH FORMULAS, TRYING TO LEARN THE CONCEPTS. THANK YOU.

Wookie Computers currently sells the LightSabre tablet for $500 per unit via the internet. Their new Solo product line is more powerful and being sold at a slightly higher price. The cannibalization rate in the first month after introduction is expected to be 69%. Current monthly sales of the LightSabre line are 54,495 and the combined product lines are expected to increase by 12%. How many LightSabre tablets do they forecast to sell in the first month presuming no seasonal or competitive impacts? 0 Number (US)

Answer 1

Cannibalisation implies the reduction in sales of one of company's products through introduction of another product.

Current month sales is 54495

Combined sales of products= 54495*112%=61034 units

The new product will reduce the sales of the LightSabre by 69%

So, the sale of lightsabre at reduced level is 54495*31%=16893 units

Now the sales will grow by 12%

So, bugdgeted sales for Light Sabre tablet=16893*112%=18920 units