Question

Dunkin Donuts is planning to launch a new spinach donut, which will compete with Dunkin's own no-fun donut. Research suggests a cannibalization rate of 31% for the spinach donut. Dunkin earns a contribution margin of $1.01 on each no-fun donut and will earn $1.24 in contribution margin on each spinach donut sold. Calculate weighted contribution margin for the new spinach donut. Rounding: penny.

SHOW WORK STEP BY STEP!!!!!

Answer 1

Answer, along with workings

Working		Spinach Donut	No fun donut
A	Sales Mix	31%	69%
B	Contribution margin	$                        1.24	$                                     1.01
C = A x B	Weighted Average Contribution margin	$                        0.38	$                                     0.70

--Weighted Average contribution margin for Spinach donut (asked by you) = 1.24 x 31% = $ 0.38
--Weighted Average contribution margin for No Fun Donut = $ 0.70
--Total Weighted average contribution margin = 0.38 +0.70 = $ 1.08