Question

Jelly belly makes various kinds of jelly beans. The company is introducing a new flavor of jellybeans high in antioxidants - Superfruit mix which has flavors such as acai berry, cherry, cranberry, blueberry, and pomegranate. consider two of their most popular jelly bean mixes - Jelly Belly Assorted Flavors and Jelly Belly Jelly Bean Chocolate Dips (chocolate cover jelly beans). Last year, Jelly Belly sold 1,000,000 packages of Chocolate Dips and 4,500,000 packages of Assorted Flavors. Superfruit Mix will sell for $4.50 ( cost of goods sold of $1.00). Jelly Belly management thinks that they could sell 3,500,00 of the Superfruit Mix per year. 30% of the Superfruit Mix sales volume would come from the higher-priced Chocolate dips which sell for $4 ( cost of goods sold of $2.25). Another 20% of the Superfruit Mix sales volume would come from the Assorted Flavors priced at $3 ( cost of goods sold of $.25)

There is an additional fixed cost of $200,000 for advertising and promotion of the new Superfruit Mix. Should Jelly Belly and Superfruit Mix to their line of candy? Why?

Answer 1

Computation of contribution
Particulars	Amount
Chocolate dips jelly
Sales Value	4
Purchase Cost	2.25
Contribution	1.75
Assorted flavor jelly
Sales Value	3
Purchase Cost	0.25
Contribution	2.75
Superfruit Mix
Sales Value	4.5
Purchase Cost	1
Contribution	3.5
Computation of additional benefit of the company from addition of Superfruit mix in their tally
		Amount in $
Particulars	Quantity sold	Contribution	Amount
Receipts of sale from Superfruit Mix	3500000	3.5	12250000
Less:
Contribution from Chocolate dips jelly	1050000	1.75	1837500
Contribution from Assorted flavor jelly	700000	2.75	1925000
Fixed Cost			200000
Total Profit/(loss) from introduction of new item			8287500

The company Jelly Belly should add Superfruit Mix to their line of candy as this will result in $8,287,500 additional profit.