FI is planning to introduce a new product called ExtraFood at a retail price of $6 per unit using the same retailer (the marketing margin of the retailer is still 20%) and broker (brokerage fee is still 5% of retail price per unit sold). ExtraFood’s manufacturing cost is $3 per unit. In order to introduce ExtraFood, FI would incur additional fixed costs of $4,000,000 per year (e.g. research and development, advertising, depreciation on new equipment). Demand for the new product is estimated to be 2 million units, 50% of which is expected to come from SuperFood. Do you recommend introducing or not introducing ExtraFood?

Answer rating: 100% (QA)

Solution Expected Demand of the new product2000000 Ex... View the full answer