Ace Products recognizes that its new Product 8 will compete with its existing Product 7. Ace...

Ace Products recognizes that its new Product 8 will compete with its existing Product 7. Ace Products estimates a 23% cannibalization rate. Ace Products sells Product 7 for $60 each, with variable cost of $32.60. Ace expects to price the new Product 8 at $75 each, with variable cost of $49.91 per unit. Calculate weighted contribution margin for the new Product 8. Rounding: penny.

MARKETING METRICS IS THE SUBJECT OF THE QUESTION.

Expert Solution

Particulars	Amount
Product 7:
Sales price	60.00
Less: variable cost	(32.60)
Contribution per unit	27.40
× cannibalization rate	23%
Contribution lost per unit of unit 8 sold	6.30

Product 8:
Sales price	75.00
Less:
Variable cost	(49.91)
Product 7 contribution lost	(6.30)
Weighted contribution per unit	18.79

Answer is 18.79

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jeff jeffy answered 1 year ago

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