There is excitement in the air! The new UltraGuard flea collar is about to be in

Question

There is excitement in the air! The new UltraGuard flea collar is about to be introduced to the market. The collar will feature enhanced protection, increased longevity and is environmentally friendly. It will be priced at $9.20 and has unit variable costs of $3.10. The company expects to sell 50,000 UltraGuard collars during the next six months. Some of the sales will come at the expense of the current product, the PetArmor collar, priced at $6.75 with variable costs of $3.15. Projected sales for the PetArmor collar are 95,000 units (without the introduction of the UltraGuard). The market analyst estimates that the UltraGuard collar will cannibalize 20,000 PetArmor collars during the introductory 6 month period.

The company is planning a sales promotion campaign to target veternarians at the time of the new product launch. The company is going to invest $ 75,000 in printed materials and samples.

How many PetArmor collars will be sold at the breakeven volume of UltraGuard collars? Round your answer to the nearest whole number.

Explanation / Answer

We have fixed cost of 9.20

Variable cost to be 3.10

and the number of products to be sold is 50000

(Total fixed costs + Total variable costs) / Total units produced

.000246

Similarly,

fixed cost = 6.75

variabble cost = 3.15

and the products sold 20000

.0001042

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