Question

VegeCheese Pie Company is a “healthy food products” company that specializes in single-serving pies filled with vegetables and cheese.  Their most successful product, the GF3, is a gluten-free oat-bran crust filled with spinach, kale and chevre.  VegeCheese Pie Company sells the GF3 for $9.25 each, and makes it for a variable cost of $3.75 each.  VegeCheese Pie Company is planning to launch a new product, the BCC, a whole-wheat crust filled with broccoli, cauliflower and cheddar.  VegeCheese Pie Company can make the BCC for $4.89 each, and believes it can sell the BCC for $9.75 each.

VegeCheese Pie Company expects some cannibalization of GF3 sales because of the BCC launch. Ignoring the new product, VegeCheese Pie Company had forecast sales of 240,000 units of the GF3 in 2015.  The company expects to sell 130,000 units of the BCC in 2015, if the product launches, but then the company expects sales of the GF3 to be 50,000 units lower than the original forecast.

The launch of the BCC pie will require a total of $250,000 in fixed costs.

1. If sales of the BCC reaches the predicted 130,000 units, calculate VegeCheese Pie Company’s change in total contribution margin due to the introduction of the new BCC product.  Answer: $356,200.

The answer is given. Please show the work in order to get to the answer of $356,200.

Answer 1

See the difference in Total Contribution with BCC and without BCC

Here is the formula version as well