Incremental Sales Assignment | Homework For You

Morten Food​ Products, Inc. is a regional manufacturer of salty food snacks. The firm competes directly with the national brands including​ Frito-Lay, but only in the U.S. Southeast. Last year Morten sold​ $300 million of its various chip products and hopes to increase its sales in the coming year by offering a new line of baked chips. The new product line is expected to generate ​$39 million in sales next year. ​ However, the​ firm’s analysts estimate that about 45 percent of these revenues will come from existing customers who switch their purchases from one of the​ firm’s existing products to the new healthier baked chips.

a. What level of incremental sales should the company analyst attribute to the new line of baked​ chips?

b. Assume that 15 percent of​ Morten’s existing customers are actively looking for a healthier snack alternative and will move to another​ company’s baked chip offering if Morten does not introduce the new product. What level of incremental sales would you attribute to the new line of baked chips in this​ circumstance? Get Finance homework help today