Question

Pisa​ Pizza, a seller of frozen​ pizza, is considering introducing a healthier version of its pizza that will be low in cholesterol and contain no trans fats. The firm expects that sales of the new pizza will be $ 25 million per year. While many of these sales will be to new​ customers, Pisa Pizza estimates that 46 % will come from customers who switch to the​ new, healthier pizza instead of buying the original version. a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new​ pizza? b. Suppose that 56 % of the customers who will switch from Pisa​ Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this​ case?

a. Assume customers will spend the same amount on either version. What level of incremental sales is associated with introducing the new​ pizza? The incremental sales associated with introducing the new pizza will be ​$ ---------- million.  ​(Round to two decimal​ places.)

b. Suppose that 56 % of the customers who will switch from Pisa​ Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier pizza. What level of incremental sales is associated with introducing the new pizza in this​ case? If 56 % of the customers who will switch from Pisa​ Pizza's original pizza to its healthier pizza will switch to another brand if Pisa Pizza does not introduce a healthier​ pizza, then the incremental sales will be ​$ ----------- million.  ​(Round to two decimal​ places.)

Answer 1

Answer)

1. In this case out of $25 million, 46% will be owing to switching and not new customers, so 54% or 0.54*$25 million =$13.5 million will be incremental sales , so correct answer is $13.5 million
2. In this case, we are told that 56% of customers who will switch from original to healthier version will switch brand altogether if healthier version is not introduced, note we are not getting any extra sales,we are merely retaining these customers ,so if they are switching from original to healthier version we cannot add them to new sales ,so even in this case our incremental sales will be extra 54% of $25 million that is $13.5 million, so correct answer is $13.5 million.

Answer is complete. Thank you!